Best December for Bonds in 7 Years Highlights 2019 Growth Risks

(Bloomberg) -- Developed-market bonds are headed for their best December in seven years in what looks to be a vote of no confidence in the global economy for 2019.

Government debt in Group-of-Seven economies has returned 1.16 percent this month, on course for the best December since 2011, according to a Bloomberg Barclays index. The MSCI World Index of developed markets has tumbled 6.5 percent in the same period, set for a record decline for the month in data starting in 1969.

“It’s rare to see such a big sell-off in stocks and buying of bonds around the world at this time of the year,” said Tadashi Matsukawa, head of fixed-income investment at PineBridge Investments Japan Co. in Tokyo. “It could be signaling a major decline in the global economy next year.”

The U.S. 10-year yield dropped below 2.80 percent Wednesday for the first time since May amid speculation the Federal Reserve will signal a slower pace of tightening in its policy decision later in the day. Japan’s 10-year yields fell to 0.01 percent, poised to decline to zero after holding above that level since September 2017.

The rally in bonds has gathered pace in recent months as data showed U.S. home sales slid, global manufacturing data deteriorated, and political tensions over Brexit and Italy’s budget have worsened. Global economic growth will slow to 3.5 percent next year, from 3.7 percent in 2018, according to economist forecasts compiled by Bloomberg.

To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net;Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net

To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, Nicholas Reynolds

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