Global bonds accelerate at fastest pace since 2008
Global bonds are soaring at the fastest pace since the 2008 financial crisis.
A Bloomberg gauge of global sovereign and corporate debt has returned 4.9% in November, heading for the biggest monthly gain since it surged 6.2% in the depths of the recession in December 2008.
November’s rally is being driven by increasing speculation the Federal Reserve and its global peers have largely finished hiking interest rates and will start cutting next year. Fed Governor Christopher Waller helped bolster that view Tuesday, when he said the current level of policy looks well positioned to slow the economy and bring down inflation.
“Waller has been a hawkish tilting member, so for him to sound dovish has been significant,” said James Wilson, a senior portfolio manager at Jamieson Coote Bonds Pty in Melbourne. “It sounds like the Fed is all but done in their hiking cycle.”
Treasuries extended this month’s gains Wednesday. US 10-year yields slid six basis points to 4.26%, while two-year yields dropped seven basis points to 4.67%. Australian bonds surged, sending 10-year yields tumbling 14 basis points, after weaker-than-expected local inflation data spurred traders to start betting policymakers are done hiking.
The current rally is just the latest turnaround in a volatile year for bonds. The securities powered ahead in January before whipsawing over the next six months, and then starting a three-month slide from August. The Bloomberg Global Aggregate Total Return index was down as much as 3.8% for the year by the time it bottomed in mid-October. The gauge is now up 1.4% for 2023.
“The Fed is providing parameters for the potential of looser policy,” said Gregory Faranello, head of US rates trading and strategy for AmeriVet Securities
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