US Bonds Market See Signs of Life as Yields Retreat in November

The US bond market finally saw some light in November after months of struggling from the rate-hike cycle from the central bank to combat high inflation in the world’s largest economic country.

As Wall Street expects the Fed to keep key policy rates in place well into early next year, investors are now flooding into bidding up the price of US Treasuries, agency and mortgage debt. This has resulted in the best month for the record books since the 1980s.

In what appears to be an imminent losing year that marks the third straight annual loss, bond traders saw a much needed rally in November. The Bloomberg US Aggregate Index showed a return of 4.9% so far this month through Wednesday, following a drop by more than 0.65 percentage points of the US 10-year bond yield to 4.26%.

The market has high expectations that there would be no more rate hike in this cycle. According to CME FedWatch Tool, the market gives nearly 96% chance that the Fed will maintain the interest rate in their last meeting of the year in December. The first rate cut could be in May 2024, or sooner.

The Federal Reserve Governor Christopher Waller said earlier that confidence is growing that the US policy rate is in place right now. However, he also continued to mention that inflation is still too high. Meanwhile, the market will also monitor the inflation figures in Australia.