Monthly report
Fed pivot drives frenzy for rate cuts in 2024, despite soft landing
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Overview
Markets now discount about 75bp more easing than the Fed in 2024, despite Fed caution, a soft landing and sticky core inflation. This increases risks of disappointment, barring early recession, given the inverted curve. Q4’s rally means only JGBs show negative 2023 returns in US dollars, with HY credit and EM best performers.
Key highlights:
- Macro and policy backdrop – Fed pivot drives substantial re-pricing of 2024 rate outlook
- Yields, curves and spreads – Yield curves bull flattened in Q4, and US sovereign spreads tightened
- Credit and MBS analysis – Credit benefits from risk appetite recovery, led by HY
- Sovereign and climate bonds – Climate WGBI outperformed, helped by duration
- Performance – Bunds and gilts performed best in Q4. After the Q4 rally, only JGBs show negative 2023 returns
These reports provide actionable insights on global fixed income markets. They cover shifts in global yield curve and credit spreads, across sovereign, inflation-linked and corporate indices, and FX-adjusted return performance using proprietary month-end data from our global fixed income indices.
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