The streak of positive months for bond investors ended in October, as rising interest rates hit bond prices. The 10-year Treasury rate rose from 3.81 percent at the end of September to 4.28 percent by the end of October. The Bloomberg Aggregate Bond Index lost 2.48 percent for the month.

High-yield fixed income also had a challenging month. The Bloomberg US Corporate High Yield Index lost 0.54 percent in October. High-yield credit spreads compressed from 3.07 percent at the start of the month to 2.88 percent at month-end. Tighter credit spreads indicate increased investor appetite for
high-yield investments.

The rise in interest rates during the month were due in part to a pullback in trader expectations for interest rate cuts. We entered the month with futures markets pricing in roughly three 25-basis-point cuts by the end of the year. We ended the month with traders pricing in one to two additional cuts by year-end, which contributed to the rise in rates that we saw in October.