Global Bond Market Brief

Notes from the Global Fixed Income Desk

By Rich Taylor & Joyce Huang, CFA - December 2018

Market and Performance Summary

Flight to quality lifts Treasuries. Throughout the fourth quarter, severe volatility gripped the equity markets, sending investors into perceived safe-haven investments. This flight to quality drove yields lower across the Treasury yield curve, particularly in December, and U.S. Treasuries rallied for the month and the fourth quarter.

Longer-duration outperforms. The 10-year Treasury yield ended December at 2.69%, down 30 bps from the end of November and 38 bps from the end of September. The Fed raised short-term interest rates in December, but the two-year Treasury yield still fell 30 bps in in the month to 2.49%. In terms of total return, longer-duration securities outperformed shorter-duration bonds.

Growth, earnings outlooks weigh on corporates. Falling yields aided investment-grade corporate bonds in December, but worries about future economic and corporate earnings growth weighed on fourth-quarter returns. Meanwhile, high-yield corporates struggled in the risk-off climate.

Global yields slide. Slowing global growth and Brexit uncertainty helped pushed non-U.S. developed market yields lower, driving global bond returns higher for the one- and three-month periods. Declining yields and a slightly weaker dollar in the U.S. helped support gains among emerging markets (EM) bonds in December. For the quarter, returns were mixed on slowing global growth, country-specific events, and modest U.S. dollar gains.

Rich Taylor
Rich Taylor
Joyce Huang, CFA
Joyce Huang, CFA

Global Bond Market Brief

Notes from the Global Fixed Income Desk

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