The Federal Reserve (Fed) reintroduced interest rate risk in the bond market last week. Corporate bonds, particularly lower-rated high-yield bonds, weathered the rise in rates better than most sectors. Bond prices overall are generally higher so far in 2014, and high-yield bonds remain expensive relative to history, but that does not mean that the sector cannot still offer value for investors. Credit quality is generally good, funding conditions are favorable, and defaults may remain low — all of which support higher-than-average valuations. High-yield bond valuations must also be taken in the context of a bond market with limited opportunities. High-yield bonds and lower-rated debt may still offer attractive opportunities in the bond market….
With the exception of last year’s steady rise, March has been maddening for investors. In three of the past four years the S&P 500 raced higher in March only to reverse all of those gains in a pullback of about 10% that began in late March or April. It later took stocks at least five months to climb back to the peaks of March.
As the NCAA tournament gets down to its own sweet sixteen while the rest of March plays out, it is a good time to reflect on the competing drivers of the markets that may make for an exciting showdown in the weeks and months to come….
Bond yields have fallen this year, but they began to rebound in the United States in the latest week as the glass-half-empty bond market realized the all-time high stock market may have it right. But this was not the case in most of Europe. The ongoing decline in European government bond yields continued last week and is striking when considering how fast they were rising two years ago. What a difference a couple of years can make. The 10-year Italian and Spanish bond yields dropped to near all-time lows at the end of last week, while Greece’s 10-year — once over 35% — fell below 7% . Problem solved? Not exactly…..
This Friday, March 7, 2014, the U.S. Department of Labor will release the Employment Situation report for February 2014. The Employment Situation report is two reports in one; the household survey generates the headline unemployment rate, while the establishment survey generates the nonfarm payroll job count. The unusually harsh winter weather across a large swath of the nation in February 2014 will likely have a major impact on the employment data in February. As of early Monday, March 3, 2014, the consensus of economists as polled by Bloomberg News is looking for a net increase of 154,000 private sector jobs in February 2014, after the 142,000 gain in January 2014. Prior to the 75,000 weather-impacted gain in jobs in December….