November Recap: Broad Rally for both Treasuries and Risk Assets
November highlights from the fixed income markets:
- Yields fell across most of the Treasury curve in November, with both Treasuries and risk assets performing well for the month.
- The Bloomberg U.S. Aggregate Index (the Agg) returned 1.1%, outperforming similar-duration Treasuries. Every sub-sector of the Agg performed well, with mortgage-backed securities (MBS) and long corporates posting the strongest returns.
- Spreads tightened for every investment grade (IG) sector and every high yield (HY) sector other than Utilities.
- Broadly speaking, spreads ended the month at multi-year tights.
- Since the results of the 2024 elections were finalized, markets seem to be celebrating the potential upside from tax cuts and lighter government regulation. That optimism is tempered somewhat by the potential that the incoming administration’s policies—chiefly tariffs—may result in higher inflation.
Read on for more details and analysis.
Market Summary
Returns were strong across all the major fixed income categories, led by investment grade corporates.
U.S. Treasury Market
Treasuries rallied across most of the curve in November, with the largest rate moves coming in the 5-year and longer segments.
Treasury returns were strong across all maturities. Year-todate returns are positive for all categories other than long Treasuries.
Broad Investment Grade
Every sub-segment of the Agg posted positive absolute and relative returns in November. MBS and long corporates were the strongest categories.
Spreads tightened across all investment grade maturity categories, ending the month at multi-year tights.
BBBs were the strongest performer among investment grade rating categories.
Spreads tightened in every investment grade sector, ending the month at year-todate tight levels.
High Yield
High yield returns were strong across all ratings categories. Spreads tightened for all HY categories, most notably CCCs.
Spreads tightened on all high yield sectors other than Utilities, which widened slightly. Transportation bonds tightened the most.
The high yield default rate was unchanged on the month.
Municipals & Other
Municipal bonds posted positive returns for the month. Yields fell across every rating and maturity category.
Convertibles and emerging market bonds were the strongest performers among the “other” sectors.
This update provides an overview of certain broad-based Fixed Income benchmarks and does not include performance of the Segall Bryant & Hamill Fixed Income styles. Past performance cannot guarantee future results. All investments involve risk, including the possible loss of capital. All opinions expressed in this material are solely the opinions of Segall Bryant & Hamill. You should not treat any opinion expressed as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of the manager’s opinions. The opinions expressed are based upon information the manager considers reliable, but completeness or accuracy is not warranted, and it should not be relied upon as such. Market conditions are subject to change at any time, and no forecast can be guaranteed. Any and all information perceived from this material does not constitute financial, legal, tax or other professional advice and is not intended as a substitute for consultation with a qualified professional. The manager’s statements and opinions are subject to change without notice, and Segall Bryant & Hamill is not under any obligation to update or correct any information provided in this material.
1 Source: Bloomberg.
2 Source: Bank of America Merrill Lynch.
3 Hypothetical yields are calculated as the AA municipal yield divided by (1-tax rate). Actual tax-adjusted yields will depend on individual tax circumstances.
4 Source: Standard & Poor’s.
