Record Low Bond Volatility Heading Into Rate Hikes

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Mark Melin
Published on
Updated on

The Bank of International Settlements (BIS), known as the “central bank of central banks,” has been outdoing itself lately. Not only did it discover $14 trillion in debt hidden in “footnotes,” but in its recent report titled “Strong outlook with low inflation spurs risk-taking,” “pretty much summarized (the) disinflation boom theme,” a Jefferies report noted. It all points to an economic environment never before witnessed, as low bond market volatility is a market feature heading into a rate hike cycle. But that headline of “low volatility” might not actually be the case when the skew spreads are considered. [dalio]  …

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Mark Melin is an alternative investment practitioner whose specialty is recognizing the impact of beta market environment on a technical trading strategy. A portfolio and industry consultant, wrote or edited three books including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008) and taught a course at Northwestern University's executive education program.