Market Extra: U.S. bond index heads for best month of returns in almost 4 decades amid rate-cut hopes

Agence France-Presse/Getty ImageNovember is shaping up to be one of the best-performing months for bonds in nearly 40 years, driven by renewed hopes for one or more rate cuts by the Federal Reserve in 2024.The Bloomberg US Aggregate Bond Index, a broad-based fixed-income benchmark, has surged 4.91% so far in November as of Wednesday’s close. That puts it on pace for the biggest monthly gain since May 1985, when the monthly return was 5.23%. The index, which is now up 2% so far this year, includes Treasurys, as well as corporate, agency, and non-agency securities. “It’s a nice reprieve because it’s been a challenging environment for fixed-income investors, with six months in a row of negative returns,” said Lawrence Gillum, a Charlotte, North Carolina-based strategist for broker-dealer for LPL Financial. “This past month was about pulling forward expectations for rate cuts, so now that we are priced in for that, we should see more of a sideways-trading market.”See:Bonds are flashing a ‘smile’ after historically bad stretch, a promising sign for 2024Whether November’s performance marks an inflection point for bonds remains to be seen. This week, New York Fed President John Williams said that interest rates are at or near a peak, but his colleague, Richmond Fed President Tom Barkin, said he is not willing to take another rate hike off the table.As of Thursday morning, 2- BX:TMUBMUSD02Y through 30-year Treasury yields BX:TMUBMUSD30Y were broadly lower on renewed selling despite October PCE data showing that inflation had eased. Meanwhile, U.S. stocks DJIA SPX COMP were mixed.

Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.