The Market Can Remain Irrational Longer Than You Can Remain Solvent

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The weak side of bond markets is definitely the upside i. So now we can conclude for definite that low yields can indeed produce higher vol! More importantly, a massive position reversal is going on. This year the macro funds have held on steadfast to the view of a rebounding US economy and the eventual bringing forward of rate hikes once the taper is done.

The trouble is, the bad US winter clouded the first six months of data, and then by markets can stay irrational longer than you can stay liquid time it became reliable, the economic cycle had started to turn lower again.

Added to that the impact of collapsing commodity prices, a variety of geopolitical woes, rising volatility, and eventually people have to take their stops on the position.

But point 6 might lead some to believe this has come too far. There are certainly some reasons to markets can stay irrational longer than you can stay liquid optimistic in the midst of this. Lower food and energy prices should leave the consumer with more money in their pocket. Mortgage rates should fall. They should beware this chart.

Bond market vol is rising but is only just back to levels at the start of the year. The volatility in bonds has only just got going. Your email address will not be published. Save my name, email, and website in this browser for the next time I comment. Get a Premium account to subscribe to Premium Insights for additional market information and guides. The question is now, will this persist? All the signs suggest that it will. Leave a Reply Cancel reply Your email address will not be published.

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