The bond market had its best month in 38 years|Wayne Hsieh|CC BY-NC 2.0
November saw a historic rebound in the bond market with a surge that delighted investors. Prices for Treasury, agency and mortgage bonds skyrocketed, resulting in the most substantial monthly gains since 1985.
The Bloomberg US Aggregate Index surged by 4.9% this month, offering relief to bond investors who were facing potential losses for the third consecutive year. This rally was triggered by a drop in the yield on the 10-year Treasury bond, which hit 4.26% for the first time since September.
The average rate on a 30-year mortgage dropped for the fifth straight week to 7.22%, the lowest in 10 weeks.
What’s causing the buzz?
Two words: Investor optimism.
Positive impacts in November were observed due to weaker job data and lower CPI figures, further supported by reassuring comments from Fed Chair Jerome Powell and Governor Christopher Waller (signs of a soft landing).
The momentum might continue into December and possibly 2024, hinging on two critical factors.
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Signs of a slowdown in both the economy and inflation.
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Indications that the Federal Reserve won't raise interest rates further.
Guess what’s turning heads now?
Predictions suggest the Fed might cut rates by a quarter-point by May—a massive shift from expectations just a month ago.
All eyes are on what Federal Reserve Chairman Jerome Powell says after the December 12 and 13 meeting—the last one for 2023.