Flattening of the yield curve was the principal theme in the US bond market in November with long duration Treasuries outperforming (see Exhibit 1 below).
As 2017 draws to a close, it looks (once again) as if the contrarian view of being overweight long maturity Treasuries was the right positioning in 2017.
Negative policy rates in the eurozone continued to fuel a search for yield that has led (bond market) investors to boost returns via corporate debt and long-dated fixed-income assets.
As in the US bond market, the euro sovereign yield curve flattened in November, resulting in relatively strong performance for sovereign debt with a maturity above 10 years.
Exhibit 1: Bond sector performance (total return; in %; latest month and 01/2017-11/2017)
Written on 01/12/2017