How Corporate Bonds Perform During Rising Rate Environments

June 1, 2004 — For bond market participants, the recent employment numbers have essentially shifted the question of Fed tightening from “when”, to “how aggressively” will the Fed raise rates? Although the March employment report sparked a repricing in the bond market, it was the April and May numbers that offered the needed confirmation that we are seeing a sustained recovery in the job market. This final piece of evidence has effectively put the Fed back into play, with expectations now that the Fed will raise interest rates between 75-100 basis points by year-end, with the first hike coming as early this month. While we have written several times over the last year and half about the impact of rising rates, and strategies for that environment, we thought it was worth revisiting with a specific focus on the corporate sector.