Nothing about today's data and the data this week give the Fed
any reason to change the taper trajectory.
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Markets are pricing September beginning and mid to late 2014
end. Markets, some would argue are doing the Feds work,
although the Fed has given the tapering guidance that has allowed
the market to do their work.
Based on the above, Treasuries should be trading in a range of
2.50-2.80% into tapering. In this range trade emerging market
assets (rates) have the ability to outperform.
There is no significant data to drive sentiment for 3 weeks, and
with this backdrop emerging markets can outperform.
Specifically, while emerging market rates remain under pressure
from taper sentiment they should outperform when spread against
U.S. Treasuries. Emerging markets currencies get a boost from
the data and the window of no news.
Remember, emerging market currencies is 50% of your return
profile on the equity side, and into the September payroll data
emerging market equities will have a tailwind in currencies that
were oversold into this Fed meeting and large economic