Spooked Market Turns To ‘Bogus’ Convexity Narrative Amid Bond Rout

Spooked Market Turns To ‘Bogus’ Convexity Narrative Amid Bond Rout

The red-hot US housing market (the "giant flaming marshmallow," as I've called it), may be poised for a kind of double whammy. Prices have, of course, surged over the course of the pandemic. Demand is strong due to a number of factors, not least of which is the much ballyhooed (and possibly exaggerated) de-urbanization dynamic. The proliferation of work-from-home arrangements further reduced the appeal of dense urban environments just as virus containment protocols sapped city dwellers' joie de
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2 thoughts on “Spooked Market Turns To ‘Bogus’ Convexity Narrative Amid Bond Rout

  1. Assurances that a rate hike remains at least a good couple of years into the future might not be enough, perhaps the market is trying to force the Fed into hinting YCC is in our proximate horizon, as you have eloquently indicated, the market can force the issue, it wants it’s cake and it wants to eat it too.

  2. Seems to me that if they have to go full BOJ in order to keep rates from getting out of hand (and killing the recovery before it’s barely out of the starting blocks), they will.

    All J-Pow has to do is tweet “WAM”, and the belly and back-end will reverse course. Everyone riding the steepener trade for the last 6 months will go screaming for the exits. And negative convexity/gamma cuts both ways, of course.

    Will be interesting!

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