After a calamitous year for bond in 2022, investors faced 2023 with trepidation, but as with stocks, bonds delivered a positive surprise. Short term treasury rates rise, perhaps in response to the Fed's bellicosity, but treasury bond rates stayed unchanged. In fact, the behavior of the bond market and the response of the economy in 2023 tested two widely held nostrums in markets - that the Fed sets interest rates and that a downward sloping yield curve is a precursor to a recession - and found both fell short. Government bond rates in other currencies also mirrored US dollar rates, and followed a strong rise in 2022 with little change in 2023. For companies, the biggest change during the year was that default spreads decreased significantly during the course of the year, as investors became less fearful.
Slides: https://pages.stern.nyu.edu/~adamodar...
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