So, the concern is that the absence of these big players is contributing to higher levels
of bond market volatility and could contribute to financial instability.
We are witnessing a gradual degradation of corporate credits, and an increase
in bond market volatility appears likely over the coming months.
But the potential for
greater bond market volatility ahead, associated with central bank policy uncertainties, and paltry expected returns, should make investors wanting to own government bonds for their perceived «safe» value think twice.
But the potential for greater
bond market volatility ahead, associated with central bank policy uncertainties, and paltry expected returns, should make investors wanting to own government bonds for their perceived «safe» value think twice.
This could lead to stock and
bond market volatility during the second half of this year that dwarfs what we've witnessed over the past two months.
Near the top of Sløk's book was this chart
showing bond market volatility rising while the number of bond market transactions has only ticked up modestly.
This would help mitigate the risks associated with what is widely perceived as a «liquidity illusion».10 The transition to such a market environment, however, could be accompanied by strained market conditions, as suggested by recent episodes of
elevated bond market volatility.
The
recent bond market volatility already prompted Fannie Mae to revise its outlook for mortgage rates, while housing experts are also concerned about how recent tax reform legislation will affect home prices.
This could lead to stock and
bond market volatility during the second half of this year that dwarfs what we've witnessed over the past two months.
And yet the VIX Index, a common measure of equity market volatility, is at half of its November peak (see the chart below) and
bond market volatility is about a third lower.
The fund adjusts its allocations daily based upon equity and
bond market volatility, correlation between the bond and equity indexes, and the yield - to - maturity of the bond index.
Instead, investors need to focus on two more nuanced measures: the term premium and
bond market volatility.
The fund adjusts its allocations daily based upon equity and
bond market volatility, correlation between the bond and equity indexes, and the yield - to - maturity of the bond index.
All in all, George says that «
bond market volatility has become a heightened source of risk for those investors nearing the date that they will need to start living off their savings.»
Most of all, regardless of potential rate increases (or
bond market volatility), the absolute level of yields means stocks will arguably remain cheap at any price...
Interest rates haven't risen (at least not yet), but
bond market volatility has certainly increased this year.
Commodities are another option that investors sometimes look at to get away from stock and
bond market volatility.