{"id":90004,"date":"2024-03-01T21:45:45","date_gmt":"2024-03-02T02:45:45","guid":{"rendered":"https:\/\/ifintechworld.com\/?p=90004"},"modified":"2024-03-01T21:45:47","modified_gmt":"2024-03-02T02:45:47","slug":"how-do-bonds-perform-one-year-after-the-feds-first-interest-rate-cut-of-a-cycle","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=90004","title":{"rendered":"How do bonds perform one year after the Fed\u2019s first interest-rate cut of a cycle?"},"content":{"rendered":"
\n

The U.S. bond market\u2019s strong rally in the fourth quarter likely has more room to run, even if the Federal Reserve takes its time in cutting interest rates, according to Janus Henderson Investors.<\/p>\n

Fed Chair Jerome Powell signaled late last year plans to pivot to rate cuts in 2024. That sparked a more than 1% retreat in the benchmark 10-year Treasury yield
\n BX:TMUBMUSD10Y
\n from its 16-year peak of 5% reached in October. <\/p>\n

\n

Falling benchmark rates also helped boost the broader bond market, with the closely followed Bloomberg US Aggregate Bond Index
\n AGG,<\/span>
\n or \u201cAGG,\u201d booking a 5.5% gain, according to Janus Henderson. The AGG dropped 13% in 2022 as the shocks of Fed rate hikes rippled through markets.<\/p>\n

U.S. stocks fell sharply midweek after the consumer-price index for January showed inflation still has a way to go before it returns to the Fed\u2019s 2% annual target, which could delay rate cuts.<\/p>\n

But for investors sitting in \u201ccash-like\u201d investments earning roughly 5%, the late-2023 turnaround in bonds can be a reminder of the potential drawbacks of sitting on the sidelines for too long.<\/p>\n

A look at past Fed rate-cutting cycles since the 1990s shows the average return on T-bills, or Treasurys that mature in a year or less
\n BX:TMUBMUSD01M<\/p>\n

BX:TMUBMUSD03M<\/p>\n

BX:TMUBMUSD06M,<\/span>
\n was 3.65% in the year after the first interest-rate cut, according to Janus Henderson. That compares with an average 6.85% return on agency mortgage-backed securities. <\/p>\n

<\/p>\n

<\/p>\n

<\/p>\n<\/figure><\/div>\n

Assets in money-market funds pulled back slightly from record territory in the past week, holding roughly $6 trillion in assets as of Feb. 14, according to data from the Investment Company Institute.<\/p>\n

\u201cIt is not timing the market, but time in the market,\u201d Janus Henderson portfolio mangers wrote in a market outlook this week. \u201cDespite higher yields today, money-market yields and returns will decline once the Fed starts to cut rates.\u201d<\/p>\n

Read next:<\/strong> Fed\u2019s Daly says patience is needed to finish the job on inflation<\/p>\n

Stocks were mostly headed for weekly gains on Friday, despite the Dow Jones Industrial Average\u2019s
\n DJIA
\n more than 500-point drop on Wednesday. The Dow was headed for a 0.4% weekly gain, while the S&P 500 index
\n SPX
\n was tracking up 0.2% for week and the Nasdaq Composite
\n COMP
\n was moving 0.6% lower for the week, according to FactSet data.<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The U.S. bond market\u2019s strong rally in the fourth quarter likely has more room to run, even if the Federal Reserve takes its time in cutting interest rates, according to Janus Henderson Investors. Fed Chair Jerome Powell signaled late last year plans to pivot to rate cuts in 2024. That sparked a more than 1% […]<\/p>\n","protected":false},"author":1,"featured_media":90005,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-90004","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nHow do bonds perform one year after the Fed\u2019s first interest-rate cut of a cycle? | iFintechWorld<\/title>\n<meta name=\"description\" content=\"The U.S. bond market\u2019s strong rally in the fourth quarter likely has more room to run, even if the Federal Reserve takes its time in cutting interest\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=90004\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How do bonds perform one year after the Fed\u2019s first interest-rate cut of a cycle? 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