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Fixed income market continues to soften on tapering speculation

Fixed income market continues to soften on tapering speculation (Part 1 of 4)

Markets down: Quantitative easing tapering could start next month

Positive macroeconomic data continues to drive speculation that stimulus will reduce

All markets were down last week, driven by good economic data. In this case, good news is bad news, since it means tapering is more likely in the near term. The near term could be as early as next month’s FOMC (Federal Open Market Committee) meeting.

HY, LL and Corp Bond Markets 2013-08-21Enlarge Graph

  • The corporate bond market (BND) was down, driven by new highs on the ten-year Treasury levels
  • The high yield bond market (HYG) was down for the week on lower new issuance volumes and renewed outflows
  • The leveraged loan market (BKLN) was down for the week, but both volumes and fund flows remained robust

Read here to learn why the leveraged loan market tends to drop in sync with the bond market despite the robust fundamentals.

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