Economic data took a back seat in December, as bond market participants focussed on the noisy, acrimonious debate to resolve the U.S. fiscal cliff. Speculation and rumours that a deal had been struck to reduce the scheduled tax increases and spending cuts persisted through the month, leading generally to lower bond prices. Without a deal, the U.S. economy was expected to enter a serious recession in early 2013, so optimism that the fiscal cliff could be averted caused rallies in riskier assets, such as stocks, and declines in the value of safe haven assets like bonds. Late in the month, with no deal yet achieved and time running out, bond prices rebounded thereby reducing earlier losses. The DEX Universe Bond index fell 0.13% in the month.
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