IVOL News and Press, Quadratic Interest Rate Volatility and Inflation Hedge From 04/19/21

Prices for staples like gasoline, lumber, labor, and copper are soaring. Yet, the Federal Reserve continues to stand by its forecast that inflation is at or below 2% and likely to remain so. So are the recent signs of inflation just a blip or something investors should start to co...

The Bank of Japan has implemented strict yield curve control in the 2-10-year area of the JGB curve since 2016, in an attempt to prevent financial conditions from tightening and to boost Japanese inflation to 2%. Other government yield curves, where central banks have not targeted any...

A US economy littered with super-buoyant readings would typically place upward pressure on market rates. That is clearly not what is happening right now. The question is why? The Fed at zero and bond buying matters, as does signalling from negative real rates. Fixed rate receiving...

By promising to remain super-accommodative for at least a year or so, the Fed runs the real risk of allowing inflation and inflation expectations to run wild. Back in February of last year, a casual observer would have remarked that Treasury yields were exceptionally - and historicall...

The earlier the Fed acknowledges the policy implication of higher inflation, the less damaging will be any ensuing increase in rates. There is a rump of Fed speakers scheduled today, presenting an opportunity to acknowledge this risk. There is less scope for ECB displays of optimi...

The first quarter of 2021 brought what the Asset Allocation Committee expected, and as it looks to the next six to 12 months, it faces two questions. Do we think the economy will overheat, pushing bond yields to levels that unsettle equity markets or even force central banks to stifle...

The biggest positive influence for stocks would be that the Fed increases the amount of money it puts into bonds, which is still unknown. After a torrid March, volume in the options market had fallen off some, resulting in a slower trading pace for stocks early in the week, until Frid...

Last Friday’s huge PPI number looked like it could cause a dramatic response in both bonds and stocks, as it came in at +4.2% (year over year), the largest gain since 2012. Bonds did not sell off violently, probably since some uptick was expected on the economic reopening, and ...

From March 15, 2020 to year end, the U.S. Dollar Index was down over 12%. It rose in the first quarter of 2021, but the Index is down 1.2% so far in April after the Fed reiterated that it won't raise rates despite forecasts that the U.S. economy will likely recover faster than its peers. ...

All of the recent positive economic news caused the IMF to raise its 2021 U.S. GDP forecast by a giant step to 6.4% (from 5.1% previously estimated). That would represent the strongest annual economic growth rate since 1984. The one warning flag is inflation. Producer Price Index rose...