Monthly Market Monitor

December 2024

Macro

As widely anticipated, the Federal Reserve lowered the fed funds rate by 25 basis points (bps) at the November Federal Open Market Committee (FOMC) meeting.

While an additional 25-bp cut remains probable at the December FOMC meeting, recent economic data has consistently come in stronger than projected, increasing the likelihood of a more gradual easing cycle in 2025.

U.S. Treasury yields moved higher immediately following the U.S. election in early November; however, by the end of the month yields trended lower, resulting in a flatter curve.

Credit

New-issue markets were somewhat dormant ahead of the election and the November FOMC meeting, but picked up significantly after those key events and ended the month with close to $100 billion in new supply.

December is typically one of the slowest months of the year for new issuance. Consensus forecasts approximately $40 billion in new issuance for the month.

Credit markets performed well in November as spreads rallied post-election.

Structured

In November, mortgage-backed securities benefited from decreased levels of interest rate volatility and posted the best monthly excess return of the year at 56 bps.

Asset-backed security issuance has already set an annual record. Investor demand seems to remain unwavering as recent auto-backed deals were significantly over-subscribed.

Chart of the Month

Citi Economic Surprise Index, United States

Chart depicting Citi economic surprise index for United States

The Citi Economic Surprise Index measures data surprises relative to market expectations; a positive reading implies data releases were stronger than expected whereas a negative reading corresponds to weaker-than-expected releases.
After a slew of negative reports during the summer months, data releases this fall have consistently exceeded expectations.

As of 11/30/24. Source: Bloomberg L.P.

Market Data

Yields	YTM %	MTD Change	QTD Change	YTD Change
3-Mo UST	4.49	-0.06	-0.14	-0.85
2-Yr UST	4.15	-0.02	0.51	-0.10
5-Yr UST	4.05	-0.11	0.49	0.20
10-Yr UST	4.17	-0.12	0.39	0.29
30-Yr UST	4.36	-0.11	0.24	0.33

Risk Premia	OAS (bps)	MTD Change	QTD Change	YTD Change
Investment Grade Credit	74	-5	-10	-19
Asset-Backed Securities	45	-10	-19	-23
High Yield	266	-16	-29	-57

As of 11/30/2024. Source: Bloomberg L.P.

Bloomberg Sector/Index Performance (USD)

	Duration (yrs.)	MTD Excess Return (%)	YTD Excess Return (%)	MTD Total Return (%)	YTD Total Return (%)
Sector
Investment Grade Credit	6.77	0.44	2.31	1.27	3.99
Mortgage-Backed Securities	5.84	0.56	0.55	1.33	2.89
Asset-Backed Securities	2.65	0.31	1.46	0.70	5.07
High Yield	2.93	0.71	5.23	1.15	8.66

	Duration (yrs.)	MTD Excess Return (%)	YTD Excess Return (%)	MTD Total Return (%)	YTD Total Return (%)
Index
1-3-Yr Government Credit	1.76	0.04	0.26	0.34	4.13
Intermediate Government/Credit	3.67	0.11	0.69	0.62	3.64
U.S. Aggregate	6.06	0.28	0.85	1.06	2.93

As of 11/30/2024. Source: Bloomberg L.P.

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