NEW YORK ( TheStreet) - Employment data, released Friday, gave much needed direction to global financial markets that had remained range-bound and volatile since the Federal Reserve hinted at a premature end to its quantitative-easing program.Bond markets reacted sharply to the news, pushing yields a few basis points lower. U.S. equities rose around 1%, and now through the use of intermarket analysis, we can take a closer look at the developing trends in fixed income.
Although the pair looks to have broken higher above support, it is still somewhat suppressed, due to the gradual nature of the U.S. recovery. The curve will flatten when the end of monetary easing becomes more definitive, but until that point, the pair should drift higher. The last chart is of Barclays TIPS Bond Fund (TIP) over Barclays 7-10 Year Treasury Bond Fund (IEF). The pairing signals inflation expectations. As inflation has become less of a threat, commodities and export-driven economies, such as China, have shown profound weakness. The price action has also left some Fed officials proclaiming that stimulus efforts are a long way from being pulled, and the U.S. could see even more loosening in order to drive inflation higher. European and Chinese inflation data will be released this week, but based on the pair below, the data may come out below expectations. Central-bank easing across the world has aimed to defeat low inflation, but until growth in demand returns, investors have no reason to fear rising interest rates. At the time of publication the author had no position in any of the stocks mentioned. Follow @AndrewSachais This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.