Global Bond Market Brief

Notes from the Global Fixed Income Desk

By Rich Taylor & Joyce Huang, CFA - November 2018

Market and Performance Summary

Treasury yields retreat. Once again, U.S. Treasury yields spiked early in the month—this time in response to midterm election results—before heading downward. Signs of moderating economic growth, along with softer rate-hike language from the Fed, pushed yields lower across the curve. In addition, continued stock market volatility triggered some safe-haven buying, which benefited the broad Treasury sector.

Longer-duration securities rally. The10-year Treasury yield ended the month at 2.99%, down 15 bps from the end of October. The two-year Treasury yield fell 8 bps to 2.79%, and the yield curve flattened. In terms of total return, longer-duration securities outperformed shorter-duration bonds.

Corporate bonds decline; munis outperform. Worries about the economic outlook and future corporate earnings growth continued to weigh on corporate bonds, which declined modestly. High-yield corporates also struggled, largely due to equity market volatility and falling oil prices. Elsewhere, positive year-end supply/demand dynamics helped munis outperform Treasuries.

Global yields edge lower. A slowing global growth outlook and uncertainty regarding a Brexit deal generally drove non-U.S. developed market yields lower. Falling U.S. interest rates and a more-dovish Fed helped slow the sell-off among external emerging markets (EM) bonds. These factors, along with a moderating U.S. dollar and better-than-expected economic growth in South Africa, helped trigger a rally among local emerging markets bonds.

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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