‘carnival’ in global bonds

Global bond markets are set for their strongest two-month rally. The global bond market is set for its strongest two-month rally on record, amid expectations that central banks will cut interest rates next year. The Bloomberg Global Aggregate Total Return Index is up nearly 10% so far in November and December, the biggest two-month gain in data dating back to 1990. Investors are flocking to bonds amid concerns about a recession and expectations that central banks will have to cut interest rates aggressively next year. Expectations of aggressive policy easing are front-loaded into pricing, said Vishnu Varathan, head of economics and strategy at Singapore-based Mizuho Bank Ltd. “The magnitude of the rally in the bond market has significantly increased investors’ total returns. There’s a sense in the markets that we’re halfway to loose monetary policy,” he said. Hideo Shimomura, senior portfolio manager at Tokyo-based Fivestar Asset Management Co., said, “What we’re seeing right now is a bond carnival. “Bond investors have been hibernating and now I sense there is a huge desire for them to come out of their dens,” he said.