Risk markets pivoted and rocketed higher on a dovish Fed that strongly hinted at the potential for 75bps of rate cuts in 2024. Optimism reigned supreme as risk and duration were handsomely rewarded. We cannot help but wonder whether it was too far, too fast, but we suspect we will soon learn whether the Fed has really tamed inflation.
Read the full report below for more information on Fixed Income, Credit Spreads, The Economy, The Fed, and our Investment Strategy going into the final quarter of 2023.
The Bloomberg Aggregate Index returned 6.82% over the fourth quarter, led by strong demand for corporate debt, long duration, and Agency MBS. Virtually every area of the fixed-income market enjoyed gains as the year drew to a close. The Bloomberg Intermediate Govt./Credit Index rose 4.56%, and the short duration Bloomberg 1-3yr. Govt./Credit Index finished up 2.69%.