All Quiet On The Debt Front Prior FOMC Meeting

by confoundedinterest

Yes, and the woman going for a night swim in the film “Jaws” felt perfectly safe too. Until the music started.

SIFMA has an excellent chart documenting the explosion of debt issuance since 1998 that   amped-up with The Fed’s intervention in 2008.

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Despite the massive growth of long-term debt (with correspond high duration risk), the interest rate volatility cube is showing calm seas … except at the short-end of matures .. and now the long-end is starting to show more volatility.

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Is it my imagination, or do those volatility spikes look like shark fins??

The Fed Funds Futures market is showing 1-2 Fed Funds rate cuts for the next two meetings.

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And the expected future outcomes are pointing in the downward direction.

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Even Austria is showing a steep decline in their 100-year bond yields.

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While it is seemingly all quiet on the bonds front, volatility is emerging at both ends of the maturity curve. HEDGE!!!!

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