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

November 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.”