This week was one of those clearly marked on the market calendar by the Federal Reserve meeting, the penultimate one before the end of the year. The market was divided between those who expected the first cut after reaching the 5.5% ceiling to be 25 points and those who anticipated a twice as powerful one, of 50 points, which was ultimately the case.
Well, in fixed income, we saw clearly this week how investors positioned themselves for the second one, buying debt and bidding up prices. the highest levels of the year to sell later once the Fed has reached its forecasts. This movement is well illustrated by the curve of the T notewhich reached a profitability on the secondary market of 3.61% on Monday, the lowest since June 2023. From there, sales began and at the close of Friday they already exceeded the 3.75%or nearly 15 basis points more in four sessions.
“Bond markets had prepared for this first decline and this was reflected in the short end of the credit curve,” says Julius Baer. “However, this does not mean that it is absolutely necessary to extend durations, as we believe it is better to remain balanced for the time being. There are still good opportunities in the short durations and in the high efficiency“, they add.
Europe is infected
On this side of the Atlantic, even if there has not been much data macro This week, to move fixed income, the market was infected by the decision of the Federal Reserve, which, in a way, is supposed to put pressure on the Europeans in view of the last two meetings of the year, for which they are currently updating two additional rate cuts of 25 points.
Thus, the German bond showed this week a movement similar to that of the American bond, reaching the required yield of 2.1%, 10 points less than what is now required in the secondary. “In Europe, the inflation trend remains intact since deflationary forces remain and are added to the economic difficulties,” says Fidelity, which also expects to end the year with 50 points less interest rates.
