US fixed income markets have continued to rally into December as investors await the results of the last FOMC meeting of the year, according to new data and insights from Morningstar Indexes.
Morningstar fixed income indexes reflect growing market confidence that the Fed may be getting closer to a “soft landing” scenario and we may avoid a recession.
The Morningstar US Core Bond Index, measuring the performance of investment-grade US dollar-denominated bonds with greater than one-year maturities, gained 4.4% in November, its highest monthly return on record since its 1999 inception. The index has advanced almost 1% so far in December through December 11.
Safe-haven assets, such as US Treasuries, are up slightly in 2023 on the back of a 3.4% gain for the Morningstar US Treasury Bond Index in November and a 1% month-to-date gain as of December 11.
US fixed income risk assets have also continued to rally amid growing investor confidence, outperforming investment grade bonds. As of December 11, the Morningstar US High Yield Bond Index is up 10.2% year-to-date and the Morningstar LSTA US Leveraged Loan Index has risen 11.9% this year, on track for its best year since the Global Financial Crisis.
Katie Binns – Director, Morningstar Fixed Income & Multi-Asset Indexes, said:
“The November jobs report and recent CPI print results are more welcome rounds of data showing the Fed’s progress in the battle against inflation and adding to the market expectation for rate cuts in 2024 resulting in gains across fixed income asset classes. Even so, it is still too early to expect Dovish tones from Chair Powell, who will likely wait for more evidence on easing inflation before giving such signals to the market.”
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