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.

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Clues to the market
The broad credit market is influenced by a host of macroeconomic factors. Last week, Treasuries remained largely range-bound in thin holiday trading until the release of the employment report on Friday dashed hopes for a rate cut and sank bond prices. For the week, the two-year note yield rose 16 basis points to 4.75%, while the benchmark 10-year yield added 12 basis points to 4.76%, and the 30-year yield increased 8 basis points to 4.92%. Bond prices move inversely to yields.

Treasuries began the week not far from where they had ended up the prior week. A mixed manufacturing report left Treasuries little changed on Monday. The 10-year note yielded 4.64%, and the two-year note yielded 4.58%. Prices slipped on Tuesday as stocks rallied and Mideast tensions eased. Unexpected strength in a pending home-sales report also helped push the 10-year yield up 3 basis points to 4.67%.

Buyers stepped in on Wednesday attracted by lower prices and soft reports on the services industry and labor growth, sending the 10-year yield down by a single basis point. Few purchasers were to be found the next day, as longer-dated Treasuries fell amid concerns over the forthcoming jobs report.

The release of the stronger-than-expected March data on Friday sent Treasuries plunging in a holiday-shortened trading session. The yield curve flattened, with the 10-year yield adding 7 basis points to reach 4.75%, its highest level in eight weeks, while the two-year yield increased 10 basis points to 4.73%, its loftiest rate in more than a month.

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

  • According to a Citigroup report at the end of March, sales of bonds backed by subprime mortgages have fallen to $79.3 billion, a 37% drop so far this year compared with a year ago.

  • Standard & Poor's, a division of McGraw-Hill, cut the credit rating on First Data (NYSE:FDC) to junk following the announcement that it will be purchased by Kohlberg Kravis Roberts for $25.6 billion.

  • A group of Adelphia bondholders lost their challenge to the company's $17 billion bankruptcy payment plan, with the federal judge ruling that "debtors have been liquidated and effectively cease to exist."

  • Borders (NYSE:BGP) scrapped plans to issue $250 million in convertible notes, just 15 hours after announcing the contemplated sale. The company stated that it would be re-evaluating its financing options.

  • General Mills (NYSE:GIS) privately sold $1 billion in 30-year floating rate convertible senior notes.

  • Time Warner Cable (NYSE:TWC) sold $5 billion senior unsecured notes and bonds in a three-tranch offering, marking its debut in the bond market.

Hot tip
Before the release of the March jobs data, Wall Street seemed to have thought that Treasuries had seen their best days.

According to a Bloomberg survey conducted between March 21 and March 23 of 21 primary bond dealers, one rate cut was projected, with inflationary concerns keeping additional ones on hold. The good news was that the dealers did not believe that mortgage delinquencies would damage economic growth, while the bad was that inflation would make additional rate cuts unlikely.

The prevailing view appeared to be that bonds were overpriced and that yields might rise for the rest of the year. The two-year note yield was projected to end the year at 4.6%, and the 10-year yield was slated to increase to 4.7%.

Given the bond market's tumble on Friday, the prescience of the dealers surveyed is notable, and one wonders now whether a benchmark 10-year return of 5% will soon be back in the forecast.

Borders is a Motley Fool Inside Value recommendation. Check out our newsletter service dedicated to finding the market's most attractive bargains. A free, 30-day trial is yours for the taking.

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 owns U.S. Treasuries and shares of the Fidelity Inflation Protected Bond Fund. She prefers her portfolio shaken, not stirred. The Motley Fool has a disclosure policy.