What is the outlook for bonds in 2024?
In 2024, we expect mid- to high-single-digit percentage value growth on most of the world's bond markets. Corporate bonds are likely to be more interesting than government bonds due to their yield pick-up and sound fundamentals. Investment grade (IG) has it all, offering interesting real yields and low default rates.
Bonds today are better positioned against a rate selloff.
The 10-year Treasury yield increased by approximately 80 basis points over the first quarter of 2022 and the fourth quarter of 2024, but the starting yield at the start of Q1 2022 was only 1.5%, while the starting yield in Q4 2024 was 3.8%.
In 2025, we expect the sustainable bond market to move broadly sideways. We forecast new issuance to reach around $975 billion, rising by just over 5% compared to 2024.
Investment strategists surveyed by Bankrate see the 10-year Treasury yield at 4.14 percent at the end of December 2025. That's up from the third-quarter 2024 prediction of 3.53 percent, but still slightly under 4.53 percent, the current trailing-12-month yield of the 10-year Treasury.
Series EE savings bonds issued May 2024 through October 2024 will earn an annual fixed rate of 2.70% and Series I savings bonds will earn a composite rate of 4.28%, a portion of which is indexed to inflation every six months. The EE bond fixed rate applies to a bond's 20-year original maturity.
When U.S. pandemic-era inflation peaked at over 9% in June 2022, Series I savings bonds may have seemed an attractive choice for investors. But now that inflation is cooling down, so are interest rates. From May to October 2024, each Series I savings bond issued will offer 4.28% interest with a fixed rate of 1.3%.
2024 Global Economic Midyear Outlook
Global growth should stay steady at just over 3% in 2024 and 2025, though volatility will remain as a pickup in growth around the world contrasts with a slowdown in the U.S.
It is working. Inflation has fallen a lot and inflationary pressures have eased enough that, in August 2024, we cut the interest rate from 5.25% to 5%. Then in November, we cut it from 5% to 4.75%. And in February 2025 we cut it to 4.5%.
The best-performing core bond ETFs of 2024 were the iShares 5-10 Year Investment Grade Corporate Bond ETF (IGIB), the JPMorgan Active Bond ETF (JBND), and the iShares Intermediate Government/Credit Bond ETF (GVI), delivering returns of 3.5%, 3.2%, and 2.9%, respectively.
Most bond investors are in it for the long haul, meaning for the term of the bond, but there are several good reasons for selling bonds before they mature. They include: Selling bonds because interest rates are about to increase, making your existing bonds less valuable.
What is the next I bond rate in 2024?
| Date the fixed rate was set | Fixed rate for bonds issued in the six months after that date |
|---|---|
| November 1, 2024 | 1.20% |
| May 1, 2024 | 1.30% |
| November 1, 2023 | 1.30% |
| May 1, 2023 | 0.90% |
Performance. Higher income returns helped spark positive performance across most bond market sectors in 2024, despite a modest rise in intermediate- and long-term yields. Lower-quality credit segments outperformed, driven by favorable macroeconomic conditions and robust investor demand.
Junk Bonds
Junk bonds are high-yield corporate bonds issued by companies with lower credit ratings. Because of their higher risk of default, they offer higher interest rates, potentially providing returns over 10%. During economic growth periods, the risk of default decreases, making junk bonds particularly attractive.
Research Affiliates' 10-year US market return expectations declined, from a 4% nominal return projection for US large caps at the end of 2023 to 3.4% at year-end 2024. The firm is expecting US aggregate bonds to outperform stocks over the next decade, and its expected volatility for bonds is also substantially lower.
The future value formula is FV=PV*(1+r)^n, where PV is the present value of the investment, r is the annual interest rate, and n is the number of years the money is invested.
Morgan Stanley strategists forecast that in 2025, mortgage rates could fall with Treasury yields, and home prices could decrease slightly amid increased housing supply. However the magnitude of a potential drop in mortgage rates is uncertain.
Data as of Dec. 31, 2024. Over the past three years, bond returns were thrashed by the Federal Reserve raising interest rates, which sent bond yields up, tanking prices. Though the Fed cut rates in 2024, they are still higher than they were three or five years ago.
If you want to keep all your good interest and get the most out of your I Bonds you should cash out: after earning 3 months of lower interest and. just after the 1st of the month.
| Bonds | Yield | Day |
|---|---|---|
| US 52W | 4.00 | -0.018% |
| US 2Y | 3.93 | -0.042% |
| US 3Y | 3.93 | -0.040% |
| US 5Y | 4.02 | -0.041% |
2024 was a good year for the stock market. The four major indexes were up. The NASDAQ Composite led the group with a change of better than 28%, followed by the S&P 500 with a 23% increase, then the Dow Jones Industrial Average (DJIA) at 13%, and the Russell 2000 with a 10% increase.
Will 2024 be a good year to sell?
Despite the slight relief, high borrowing costs and record home prices have kept many potential buyers on the sidelines. Inventory levels have improved but remain below the threshold for a balanced market. Together, these challenges have made 2024 a difficult year for those looking to buy or sell a home.
Looking ahead, we foresee real consumer spending growth of 2.7% in 2025, following a 2.8% advance in 2024. The average will mask a gradual moderation in spending trends with consumption momentum likely to ease from 3.2% year over year (y/y) in Q4 2024 toward 2% y/y in Q4 2025.
The Federal Reserve's Federal Open Market Committee (FOMC) declined to adjust interest rates after its first meeting of the year on Jan. 28 and 29, 2025. Starting in September, the FOMC lowered the federal funds rate three times in late 2024, ending the year with a target range of 4.25% to 4.50%.
CD rate predictions for 2025
It cut its target rate three times in late 2024 by a total of one percentage point. The Fed has indicated it will continue cutting its target rate in 2025. However, it now projects a total of two cuts, down from its previous projection of four.
| Month | Average 30-Year Fixed Rate |
|---|---|
| March 2024 | 6.82% |
| April 2024 | 6.99% |
| May 2024 | 7.06% |
| June 2024 | 6.92% |
