Interest Rate Volatility Poised for Bull-Run
The so called ‘YLDVOL’ index represents the 30-day implied volatility of the 10y US interest rate, expressed in annualized basis-points terms. This metric reflects the markets’ expectation of future volatility. A reading of 80.63 indicates that the yield of the US 10y treasury bond is likely to be + or – 80.63 basis points from where it is today (with a 66% level of confidence). That is a 70% wider spread than was being priced in back in October!
With the limits of QE seemingly having been reached and with the change in direction from Washington, we are likely to see a cyclical upswing in volatility across all asset classes; potentially most acutely in bonds.
Article contributed by Triple3 (VIEW LINK)
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Simon is the founding partner and CEO of Triple3 Partners, a specialist volatility solutions group. He is responsible for the development and implementation of the quantitative strategies. For institutional clients around the world we offer a...
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