Quick Bite | US bonds on track for best month since 1985

The sharp rally in global bond markets is driven by growing expectations of US interest rate cuts in 2024. Bond prices have surged and yields dropped this month as traders have increased their bets that the US Federal Reserve (Fed) has finished raising interest rates.

US bonds are on track to record their best monthly performance in nearly four decades, as growing optimism about interest rate cuts by the Fed next year fuels a dramatic rebound from a low baseline.

The Bloomberg US Aggregate bond index, a widely tracked measure of total returns on US fixed income, has risen 4.3% in November, putting it on course for its best monthly showing since 1985.

The rally has nudged the benchmark’s total returns this year into positive territory, raising hopes it can avoid  3 consecutive years of losses, which is unprecedented in its 47-year history.

Prices of government debt around the world have followed the US higher, leaving the Bloomberg Global Aggregate bond index on course for its best month since the GFC in 2008.

Interest rate futures indicate investors have swung to fully pricing in a 25 basis point cut by the Fed’s May meeting, compared with expectations in mid-October that there was no chance of a cut by mid-2024.

Source: Financial Times


The rally has also pushed down yields on 10-year Treasuries from a 16-year peak of 5.0% a month ago to a low of 4.25% in recent weeks.

Bullish investors were heartened by comments from one of the Fed’s most hawkish policymakers, Christopher Waller, who said he was “increasingly confident” that the Fed’s current policy was “well positioned” to bring inflation back to the Fed’s target of 2%. Also adding to the positive mood was a slew of data showing inflation as being lower than expected in a wide range of countries.

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