Wall Street Webcasting has prepared and provided for you an exclusive broadcast of Wells Fargo Securities own, Rich Gordon. Gordon is highly recognized for his weekly narrates regarding the fixed income strategy at Wells Fargo Securities (
. This week, Gordon concentrates on the turn around that has taken place in the Stock Market, and the major effects that this may have on other spread sectors.
It was a defining day in the market on Friday. The Payrolls number came in at a 192,000, which was a moderately strong number. This figure came in at 8:30 a.m. A few hours later, the market did a complete turn-around and the rest of the day consisted of profit taking and put buying, especially in areas such as Biotech. The Nasdaq is now off by 6% since its highest points seen early in March.
Central Banks across the advanced world (and especially the Fed) have implemented a series of lax monetary policies, some of which include zero interest rate policies and perceptible easing programs. These programs may take a few more years to fully diminish. With the Fed still cutting back on asset purchases and Janet Yellen warning investors that there may be rate inflation occurring by the middle of 2015, it looks as if these loose monetary policies that are in place will begin to alter.
The technical picture in the fixed income spread sectors is a strong one in general. Being that it is still early in the year, portfolio managers are pushing to get assets on the books in order to create an earnings stream for 2014. However, if we continue to see weakness in the equity markets within the next couple of weeks, treasuries would rally and spreads would widen. Wells Fargo’s analysts believe, though, that it wouldn’t take much to sway investors’ sediments. This has been occurring in the equity markets and if it were to continue, there will most likely be some re-pricing within the fixed-income markets as well.