BofA On How To Benefit On “Rates-Slaved” Trades

US Ten Year Treasury notes are exhibiting a highly unusual correlation with a number of global assets. This abnormality is setting up a variety of potential trades, an October 3 Bank of America Merrill Lynch report notes. Many of these trades are based on “rates-slaved” low volatility assets, the Global Equity Volatility Insights report noted, pointing to long convexity trades and strategies that benefit from a pick-up in interest rate volatility.

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Interest rate volatility is at interesting, if not troubling lows, depending on who one listens to. The Bank of International Settlements, whose financial stability warnings are closely monitored, noted the oddity. Now a BofA report says...