Biggest Blowout in Bonds Since the 1980s Sparks Everything Rally

In a year in which little has gone right in the US bond market, November turned out to be a month for the record books.

Investors frantically bid up the price of Treasuries, agency and mortgage debt, sparking the best month since the 1980s and igniting a powerful pan-markets rally in everything from stocks to credit to emerging markets. Even obscure cryptocurrencies, the sort of speculative, uber-risky assets that struggled when yields were soaring, posted big gains.

For those bond investors bracing for a possible third straight year of losses — an unprecedented streak in the Treasuries market — the rally was desperately needed. The Bloomberg US Aggregate Index has returned 4.9% this month through Wednesday as the yield on the 10-year bond, the benchmark for everything from home loans to corporate debt, sank close to 0.65 percentage points to 4.29%.

Whether the rally extends into December and then 2024 depends on if the principal forces behind it — signs that the economy and inflation are slowing and that the Federal Reserve is done hiking interest rates — keep building. Cooling jobs data and soft consumer inflation figures proved a boon for bonds in November, while dovish comments from Fed Chair Jerome Powell to Governor Christopher Waller added fuel to the advance.

“We’ve been getting economic data recently that reinforces the idea of the Goldilocks slowdown,” said Rebecca Patterson, former chief investment strategist at Bridgewater Associates. “Inflation is coming down, and at the same time it hasn’t been unduly impinging growth.”

us bonds on pace for best month since 1980s