Since the bond market low in mid-October 2023, a strong rally ensued. The 10-year Treasury yield fell from 4.99% to 3.79% on December 27, 2023 (source: Bloomberg 1/17/24). Investor’s expectations of future interest rates drive the market.
With interest rates reaching levels not seen since since 2007, divergent outlooks are increasing. On the one hand, a recent article noted that some money managers are betting against the corporate and high-yield bond markets by shorting the larger and more liquid exchange traded funds (source: Bloomberg
10/16/23).
The Federal Reserve’s aggressive campaign to reduce inflation to its acceptable target of 2% is clearly bearing fruit. Earlier in July, on 7/7/23, the Bureau of Labor Statistics reported declining job growth with nonfarm payrolls increasing 209,000, below consensus estimates.
”Since the full impact of monetary policy actions can take as much as 18 months to work its way through the economy, we will continue to look closely at available data to determine what, if any additional actions we may need to take.” (Patrick Harker, Philadelphia Fed 4/11/23 source: Bloomberg)