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‘Another Double-Digit S&P Decline Could Be Disqualifying’: Trump As Convexity Consumer

"The only way an overinsured individual can monetize is by creating an 'accident'".

"The only way an overinsured individual can monetize is by creating an 'accident'".
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4 comments on “‘Another Double-Digit S&P Decline Could Be Disqualifying’: Trump As Convexity Consumer

  1. I’m sure that’s a coincidence in the Bloomberg chart of Presidential stock performance, Obama is a black line and Trump is orange. 🙂

  2. Aunt Carpenter

    Re: “the convexity imbalance is likely to continue to support short dated volatility further”

    Something worth pondering, is the question of what happens to the deficit that nobody ever worries about, i.e., as bonds slide downward, how will the market react to higher priced binds — and how will that effect treasury borrowing, and the Fed balance sheet? That’s super complex stuff which goes beyond the exasperating paradox that the Fed finds itself in — and I think this is a case where the Fed is not isolated in terms of policy, this is (also) a treasury issue which goes to the core matter of trump chaos and thus how America will be managed. This is worth digging deeper, because, deficits will matter.

    Re: “.. the financing gap faced by Treasury in coming years is likely to be too large to address with a heavy concentration of front-end issuance. Such a policy would also imply an undesirable decline in the WAM (weighted average maturity) in response to Fed run-off and higher deficits.”

    The Fed run-off and potentially higher deficits represent meaningful challenges that would require a sustained shift in borrowing needs to be spread across the curve.

  3. Anonymous

    The GOP and Tea Party members who ‘went ballistic’ over Obama-era deficits acquiesced to the Trump regime making the debt and deficit issues immeasurable worse. They should have been careful who they wished for…

  4. bitterpill

    Here’s the trump blueprint for making America great (again) @ FRED

    https://fred.stlouisfed.org/graph/?g=oEEv

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