IVOL News and Press, Quadratic Interest Rate Volatility and Inflation Hedge From 06/20/21

At the FOMC meeting, the median outlook for core inflation this year drifted up to three percent from 2.1 percent (though the long-term inflation outlook didn’t change). Of more direct market consequence, the median “dot plot” around the Fed funds rate in 2023 had...

As the dust settles, the implications of the ECB and Fed June meetings are subtle. EUR rates should be shielded to an extent from a hawkish Fed, but if the outlook deteriorates, long-end rates will continue falling. This is a bond market that refuses to bow to contemporaneous macr...

The latest update for the June 2021 central bank conclave shows several more voting members projecting the first rate hikes to begin toward the end of next year, a supposedly very hawkish shift from the last time. While that may be true, it also doesn’t mean anything, especiall...

The only thing “hawkish” that I found in the Fed’s minutes was the “feather bed” of no projected hikes in yields for at least two years. As to the dot plots, they are also a projection that is two years out. All of the negative sentiment is more ...

We had highlighted three risks to our base case, and the Fed managed to deliver on all three. The 5bp hike in the rate on excess reserves (from 10bp to 15bp) is being downplayed by the Fed as being just that - a technical move. The market reaction has been clear, but actually mute...

Fed holds steady on rates but forecasts two rate hikes by end of 2023. Fed boosts inflation and GDP outlook in 2021. Colbourne: U.S. dollar weak trade has run its course amid the Fed's more hawkish stance. For further details see: Fed Holds On Rates, But Projects 2 Rate ...

The Fed candidly admitted today’s soaring inflation is not what it had in mind. The S&P remains hunkered near that 4200 level that has acted like a magnet to its highs and lows. The bond market decided perhaps it should take inflation seriously again after all, with yields ...

The most frequent way that investors come to believe in impossible things is that they fail to impose “equilibrium.”. When investors form their expectations for returns based on price behavior, and price behavior is driven by investor expectations in turn, the feedback l...

The stock and bond markets have taken the view that inflation is “transitory,” as the headline CPI rose 5% yoy in May and the 10-year Treasury market celebrated the inflation news by sending yields down to 1.44%. The German/eurozone and Japanese money rates could be help...

The Labor Department reported that the CPI rose 0.6% in May, bringing the total rise in the past 12 months to 5%. Does the FOMC still think that inflation is just “transitory?” - and will they begin to change their current accommodative policy? The Fed is in the proc...