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. The pair below is of S&P Equal Weight ETF ( RSP) over Investment Grade Corporate Bond Index Fund ( CORP). It measures investor sentiment on the current economic climate. As equities raced higher in late 2012, U.S. stocks outperformed corporate debt, signaling strong investor sentiment. The pair briefly consolidated beginning around May 22, the day Fed Chairman Ben Bernanke testified in front of Congress, but has since rushed toward upper boundaries based on the view that the Fed will continue its stimulus efforts. Economic data remain light next week, giving this pair room to move higher.
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.