Investors have gone all-in on bonds this year, pumping a jaw-dropping $600 billion into global bond funds—breaking the previous record from 2021. Why the sudden love for fixed income? Simple: inflation's cooling off, central banks are easing up, and bond yields are sitting pretty at levels not seen in years. The 10-year U.S. Treasury yield, for instance, is hanging around 4.5%, up from sub-4% at the start of the year. “This was the year of the bond,” says BlackRock's (BLK, Financial) Vasiliki Pachatouridi, spotlighting a renewed appetite for steady income after years of rock-bottom rates.
Corporate bonds have been the showstoppers, rallying hard as companies rode out earlier rate hikes by locking in cheap funding. The ICE BofA global corporate bond index just saw spreads narrow to their tightest since the pre-2007 crisis days. And let's talk ETFs—they're crushing it too. Passive funds snagged $350 billion in inflows by November, making it easier than ever for investors to dip into bonds. BlackRock and Vanguard? They're cleaning up, with billions funneled into their bond-focused ETFs. Martin Oehmke from the London School of Economics mentioned that ETFs have made bonds way more accessible.
But here's the twist: 2025 might not be as rosy. U.S. equities are stealing the spotlight, raking in $117 billion in November alone, as the stock market climbs higher on optimism about President-elect Trump's economic agenda. Plus, the Fed is hinting at slower rate cuts, which could cap further bond rallies. Carl Hammer at SEB warns that it would be hard to see bond yields dropping much lower from here. Even so, with solid yields and a global tilt toward looser monetary policies, bonds aren't just back—they're firmly in the game for anyone playing the long view.
