The fixed income market is also known as the bond market, but is actually more comprehensive in nature since it incorporates all types of securities that yield a fixed stream of income. This would include short term notes or long term bonds that pay out a fixed coupon or interest payment. It also includes bank certificates of deposit (CDs) that pay a specified interest rate.

One can also think about the fixed income market as the yield on a bond or interest rate levels in general. The level of interest rates affects economic activity. Interest rate levels help consumers to determine how much they can borrow (or even if they want to borrow at all). Consequently, this affects the level of overall spending in the economy.

Borrowers prefer low interest rates. Low interest rates indicate that loanable funds are readily available and that borrowing is inexpensive. In other words, this is easy credit. When interest rates are high, and or rising, the cost of borrowing increases for consumers and businesses. It will be harder to attain loanable funds, or it will simply cost more to repay debt.

Consumer spending and business investment are both affected by the propensity to borrow and the availability of funds. Low interest rates tend to boost consumer and capital spending. High interest rates curtail expenditures on consumer and business goods - particularly large-ticket items like cars or furniture.

Thus low interest rates spur economic activity and high interest rates dampen activity. That's why the Federal Reserve raises or lowers the federal funds rate (the rate charged on overnight use of bank reserves) in order to curtail or accelerate the pace of growth in the United States.