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Uncertainty Drives US Bond Price Volatility
Bond market volatility over the last three years has been historic. Now that it has leveled off a bit, what might lie ahead? A few months ago, traders and the market were pricing in as many as six rate cuts – approximately 140 basis points – this year, while the Federal Reserve was pricing in three – around 75 basis points. Now, the CME FedWatch Tool indicates they are in line with one another. What Caused Recent Volatility? As rates fall, bond prices rise because it is worth more to hold the rights to bond repayments based on their higher rates. At the beginning of the pandemic, bond prices soared as traders ... (full story)