Overtime

Bond investing in 2024

Good morning,

This week we’re covering the fixed income landscape and providing an overview of bond investing in 2024. Talk of cuts from the Federal Reserve have dominated the conversation, but interest rate volatility has been subdued to start the year. Could that continue over the remaining 10 months?

This week we’ll cover:

• Technicals for key Treasury tenors

• Where there is the most value within the curve

• The risk/reward for corporate bonds

• and investable ETFs

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Key interest rate technicals

2-year decline is stalling at 4%

Let’s be clear: The long-term trend in 2s is down and we aren’t going back above 5% anytime soon. But shorter-term, the decline has stalled and 2s have found some support just above 4%. Amid this week’s inflation data, watch for a move above 4.41%. If we end the week above there, it’ll be another sign that the market is dialing back its hopes of an aggressive cutting cycle in 2024.

10-year testing YTD highs

I believe we’ve also see the cycle highs in the 10-year yield but we have to respect the YTD price action. 10s bottomed on December 27 and have been basing since. The resolution of this range will be important, and a break above 4.2% would suggest risk to 4.5-4.6%.

30-year for confirmation

I always look to the 30-year yield for confirmation of what is happening with 10s and you can see that it didn’t even retest its December lows like the 10-year note did. It’s also a technically cleaner chart with the significance of 4.4% stretching all the way back to 2022. I think the most bullish thing for equities would be if 30s stayed in the range between 4 and 4.4%.

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Value within the curve