Meet Investor 007. His specialty? Bonds. Fixed-income bonds.

Don't be fooled by their low-profile reputation. Beneath that cunning disguise, bonds are sophisticated tools to help safeguard your portfolio from the perils of riskier investments. Here's the latest intelligence on their high-stakes world. If you're new to the game, get briefed on the basics of Investor 007's business, or check out our Bond Center for some useful gadgets to help ensure a successful investing mission.

Spying on rates
The benchmark U.S. Treasuries are key rates to keep under surveillance. Corporate issues are generally priced at a spread to a Treasury rate with a similar term, based on the issuer's credit rating.

U.S. Treasury

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Clues to the market
The broad credit market is influenced by a host of macroeconomic factors. While stocks rallied for most of the week, the bond market sagged, unaccustomed to a dearth of gloomy news.

Initially, the bond market continued the prior week's rally. On Monday, the reported drop in the median price of existing home sales helped prop prices and send the ten-year yield to 4.54%, its lowest level in seven months. Bond prices fell for the next four days.

Treasuries slipped on Tuesday due to a strong consumer confidence report. A weaker-than-expected durable-goods order initially led the market higher on Wednesday, but prices soon fell following the release of stronger-than-expected new-home sales data. Ten-year notes tacked on two basis points to yield 4.60%. Even a report showing a slowing in gross domestic product growth failed to revive bonds on Thursday, and the 10-year added on another basis point in yield. Prices fell again on Friday, when a Midwest manufacturing report indicated a surprising increase in activity. Yields on the 10-year rose another two basis points, to end the week approximately five basis points higher.

Detecting developments
Investor 007 noted the following occurrences in the bond market last week:

  • A court found BearingPoint (NYSE:BE) in default on its 2.75% series B convertible subordinated debentures, due 2024, for failure to file timely financial reports. The company said it would appeal the ruling.

  • The Treasury sold $20 billion in two-year notes at auction on Wednesday at a yield of 4.66%, the lowest since February.

  • Competition may grow in the ratings-agency arena after the U.S. House, following the Senate, approved legislation to allow debt ratings companies in existence for three years to register for federal designation. Currently, Moody's (NYSE:MCO), Standard & Poor's -- a division of McGraw-Hill (NYSE:MHP) -- and Fitch Ratings represent the bulk of the worldwide credit rating market.

  • A senior Treasury Department official spoke before the Bond Market Association about the increased observance of questionable activity in the U.S. Treasury market.

  • The Treasury sold $14 billion in five-year notes at auction on Wednesday at a yield of 4.569%, the lowest since January.

  • Wendy's (NYSE:WEN) proceeded with its spinoff of Tim Hortons after a federal judge denied the claim of a group of noteholders who alleged that the transaction would violate terms of the company's debt.

  • S&P raised the ratings of many municipal bonds due to a modification in the way the agency evaluates the stability of revenues generated by sales and income taxes, and highway use fees.

Hot tip
Psst . want to know where a top bond-market guru thinks the market is heading? Check out the views of Bill Gross, the managing director of PIMCO, the world's largest fixed-income manager.

Each month, he shares his insights into the bond market in his Investment Outlook posted on the firm's website. For October, he posits that the Fed will have to cut rates next year, the timing and extent depending on the housing market and the global economy.

He believes the current bond market rally has a long way to go, and that longer durations and the front end of the curve, up to 18 months, are where money should be put to work. He also advises that one should be willing to acknowledge increasing daily volatility.

If you need advice beyond interest rate forecasts, note that this month's column also features his philosophy on parenting and the empty nest syndrome. It seems that even the bond king is human!

Conduct further reconnaissance in the Fool's Bond Center.

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Fool contributor S.J. Caplan has been an undercover fixed-income aficionado ever since serving in banking and legal capacities covering debt underwriting as well as fixed income derivatives. She does not own shares of any of the companies mentioned, but owns U.S. Treasuries and shares of the Fidelity Inflation Protected Bond Fund. She prefers her portfolio shaken, not stirred.