Just when we thought we could have a respite from Europe, spiking Spanish yields reminded us that there is no rest for the weary. Driving today’s Spanish rate move well above 7% was the apparent victory of Eurozone finance leaders to approve the final bailout of Spanish banks. However, many questions remained unanswered, and the lack of Eurozone urgency pushed Spanish yields to all-time highs and Treasury yields to all-time lows. Despite these continuing concerns, we remain constructive on the U.S. fixed income market, and the reach for yield, resiliency of corporate America and a lack of issuance has created a bit of a Goldilocks scenario over the past few weeks. While today’s equities market selloff provides a stark reminder that global issues remain, we have dislocated from the risk-on/risk-off market recently and would expect this pattern to continue. Earnings have been in full swing and most companies are beating their reduced expectations. Talk of QE is reaching a fevered pitch following Chairman Bernanke’s Congressional testimony this week, although we feel that he will want to see one more monthly employment report which, from a timing perspective, moves any announcement to Jackson Hole again. Earnings are again in the spotlight next week, along with Spain’s borrowing costs.. Read the full commentary now.
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