Investors are plowing money into Spath’s broad-based assets, putting the ETF Industry in the driver’s seat for what is another record year.
Almost everything has been put into bonds recently.
The Federal Reserve has been cutting interest rates. Job growth and consumer spending are slowing, keeping hopes of more cuts alive, but not signaling an imminent currency meltdown that could threaten balance sheets. Inflationary pressures have continued to moderate, despite fears that the President’s tariffs will drive prices higher.
Bloomberg The Bloomberg US Aggregate Bond Index has returned about 6.7% through 2025, accounting for price changes and interest payments. That puts it on pace for the best year since 2020.
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| It’s teasing | Security | – Last | Answer | change % |
|---|---|---|---|---|
| BND | Vanguard Total Bond Market ETF – USD | 74.20 | U +0.04 |
+ 0.05% |
| – Godlo | Ishares Core Us Aggregate Bond ETF – USD Dis | 100.02 | +0.02 |
+ 0.02% |
| BNDX | Vanguard Valittal Bond Index Fund ETF – USD Dis | 49.50 | U +0.04 |
+ 0.08% |
| The phone | Ithisares trust ihares 0-3 Treasure Treasure | 100.55 | +0.01 |
+ 0.01% |
Investors say 2025 feels different. The increase is renewed by the investors of the broadcast from the unusual change that followed the surge in the prices of avera-19-19. Unlike a few years ago, index returns are out of date for short T-terms — another choice for investors looking for a safe alternative to stocks.
“It’s been more fun going to client meetings this year as a Bond Manager,” said Cal Spranger, managing director of fixed income at Badgley Phelps Wealth Managers. “A few years ago, I wasn’t invited to any.”
While government and corporate bond yields have fallen slightly, they are still far above the paltry levels seen during the past decade – investors want to lock them in while they can.
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At times at the beginning of the year, a short but sharp sell-off in US reasres raised the alarm that the bond market might maintain a pole under the pressure of our borrowing. The size of the budget deficit can affect yields because a large deficit means that the government needs to borrow more by issuing assets, and, in turn, attract the demand for this debt at higher rates.
US Federal Reserve Chailos Jerome Powell speaks during a press conference at the end of the meeting of the Financial Committee in Washington 29, 2025. (Jim Watson/AFP/Getty Images/Getty Images)
Falling rates have greatly reduced all of those concerns because bonds issued when rates are at their highest are expected to decline. At the beginning of the year, investors were not sure if the Fed would be able to reduce rates given the inflation and expectations that Trump will pursue monetary policies. But the sluggish labor market has already resulted in two layoffs this year, with another layoff likely.
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Treasury bonds, which fall when bond prices rise, have declined as a result. The yield on the 10-year 10-year has been left nearly a percentage point lower this year, settling Friday at 4.147%.
US Secretary of State Scott Bessent and US President Donald Trump look on during the White House digital White House in the White Dining Room on March 07, 2025 in Washington, DC. (Anna Moneymaker / Getty Images / Getty Images)
And it helps bonds: The Trump administration has kept close tabs on the market, which is sometimes threatened during periods of turmoil. The President temporarily suspended most of his so-called recovery money in April because of “yippy” bond investors. Treasury Secretary Scott Besstent said maintaining patience at the bottom of the long-term recession was a priority for the administration. They act as a benchmark for borrowing costs for everything from tuitiongages to student loans.
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There are still many threats to threats. The path to an interest rate cut has been muddled by divisions among central bank officials, with some throwing cold water on the December rate cut. Federal Reserve Chairman Chrome Powell warned in October that the Fed is “far away” from getting rates lower next month, an unusually short comment from a central bank.
Investors now believe that the average December rate is almost a COIN Flip. Futures markets on Friday were priced at 46% chance of a cut, according to CME group data, down from about 67% a week earlier.
Some worry that the US credit market is overheating and that high interest rates on consolidated debt are weighing on the market and compensating investors for taking risks. The additional yield, or spread, that investors get to hold high-grade corporate bonds trades to 0.72% basis point through September, the lowest level since the late 1990s. It has already been well received with an impact of up to 0.83 Percentage Point.
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Some analysts warn that the US government’s budget shortfall is likely to weigh on the bond market again. The deficit came in at $1.8 trillion in fiscal year 2025, almost unchanged from 2024.
“It’s definitely going to be a problem at some point,” said Mike Goosay, chief investment officer and global head of fixed income in asset management. “You can borrow a lot before investors start chasing you.”
Many see the good times continuing, believing that development rates are not enough to fall despite recent expressions of uncertainty.
Matt Brill, Senior Portfolio Manager and Head of North American Monetary Funds at Invesco, said his group favors short-term bonds in the belief that upcoming economic data will pressure the Fed to continue cutting.
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“You don’t get a lot of layoffs, but you also don’t get jobs created,” he said. “I think the Fed is looking at that, and it’s about them.”
Write to Krystal Hur krystal.hur@wsj.com with Sam GoldFarb at sam.goldfarb@wsj.com
