The rally in spreads is likely to continue in 2024, according to Goldman Sachs strategists.
New mortgage bonds now offer yields that are about 1.66 percentage point higher than Treasurys.
Goldman Sachs believes the Fed will pause after May, enabling the U.S. to avoid a recession over the next 12 months.
Bloomberg's Global Aggregate Total Return Index has fallen 20% from its 2021 peak, its biggest drop since 1990.
It's a particularly difficult environment for investors, with bonds and stocks sinking in tandem this year.
Risk premiums are set to build as central banks withdraw stimulus, they said.
This might be the toughest year for global fixed income since 2005.
There were few places for fixed-income investors to hide in September.
Government and corporate bonds around the world have tumbled in their worst start to a year this century.
Companies have sold a record $2.44 trillion so far this year across currencies.
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