U.S. Treasury yields declined again last week, as global trade worries worsened. The largest declines occurred on Monday and Wednesday, led by the 5- and 2-year maturities. The Federal Reserve (Fed) reinforced a patient outlook for interest rate policy, taking a wait-and-see approach.

Global high yield bonds sold off amid the latest spike in market volatility, along with other risk assets. Yet this does not change our view that exposure to the asset class is important for fixed income investors in an environment where carry, or coupon income, is becoming the main driver of bond returns.

As millions tuned in to watch the HBO series Game of Thrones in its series finale this past weekend, deteriorating trade relations between China and the U.S. has led to some stock market carnage analogous to the bloodshed the series is known for. In the week ending May 10th the S&P 500 fell by 2.2%, the worst weekly decline since December.

Stocks continued to decline last week, as a worsening trade dispute dominated the news. The S&P 500 Index fell 0.7% for the week, with industrials and technology both hurt by trade worries. The financials sector was also weak, as banks were hit by a decline in interest rates. Defensive areas of the market fared better, with REITs, utilities and consumer staples being the standouts.