Cyclicals as a whole took a step back last week, but the reopening narrative should continue to work in the banks’ favor. Emerging markets debt appears to be the fixed income asset class of choice lately. Utilities didn’t perform as well as its defensive counterparts last week, but the sector is trending modestly higher again.

Last week’s inflation numbers managed to improve what was already a strong year-long uptrend in the TIPS market. It looks like the stretch of outperformance for junk bonds relative to Treasuries might be peaking here. Non-China emerging markets have done better recently and we may be seeing some of that spill over here.

10-year Treasury yields have been locked in around the 1.6% level for about the past four weeks as the bond market contemplates its next move. The equity markets may have become less concerned about inflation following last Friday’s disappointing jobs report, but TIPS continue to lead the Treasury market.