Global Bonds Re-Enter Bull Market as Fed Easing Bets Extend

Core Insights - Global bonds have re-entered bull market territory, with Bloomberg's GlobalAgg Index rising over 20% from its 2022 low, marking the highest level since March 2022 amid a fixed-income rally [1][5] - The Federal Reserve is expected to reduce interest rates by 25 basis points next week, with some traders anticipating a half-point cut, as central banks respond to declining inflation and labor market pressures [2] - The bond rally has alleviated some pressure from political crises, such as the recent situation in France [3] Market Activity - There is strong demand in primary markets, with the European Union receiving over €98 billion ($115 billion) in orders for a 30-year bond and more than €70 billion for a five-year tranche [4] - The yield on global investment-grade corporate bonds has decreased for four consecutive days, reaching 4.26%, the lowest since August 2022 [4] Strategic Analysis - The rebound in Bloomberg's Global Aggregate Bond Index is not necessarily a sign of confidence in sovereign debt, as global corporate bonds have been the standout performers [5] - Longer-dated bonds in certain regions, particularly France, are facing pressure due to rising fiscal risks, highlighted by the recent political instability [6]