Bonds: Volatile, but not boring

ON BONDS

Government shutdown, tapering, quantitative easing, Abenomics, bail-ins, stress tests, debt ceilings, re-setting economies, the Volker rule and geo-economics are just a few of the challenges facing bond investors today. Are bonds boring? I do not think so. Are they volatile? Absolutely.

Markets have gone through a major transition over my career. We have moved from localised markets to one large global market that suffers from regular bouts of contagion, as uncertainty in one part of the globe affects markets around the world. Investors have seen the transition from a marketplace where liquidity was provided by dealers willing to take balance sheet risk, to one where risk-taking capacity has diminished to the point end buyers are looking for alternative trading platforms. The marketplace has also become filled with more and more instruments to express a view, and is ...