Odd Lots

Harley Bassman on Why the Big Moves in the Bond Market Are Done

Jan 11, 2024

In this engaging discussion, Harley Bassman, the Convexity Maven and managing partner at Simplify Asset Management, shares insights into the bond market's recent volatility and its future outlook. He believes that as the Federal Reserve approaches its 2% inflation target, we can expect a normalization and steepening of the yield curve. Bassman also reveals his favorite trades for 2024, reflects on Jerome Powell's legacy, and even shares his unique approach to selecting chart colors, blending finance with personality.

44:26

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Episode guests

Harley S. Bassman

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Quick takeaways

The yield curve is expected to steepen after years of intense inversion as the Federal Reserve approaches its 2% inflation target.

Understanding the relationship between stocks and bonds and the role of options is crucial in fixed income investing.

Deep dives

Summary of the Podcast Episode

In this episode of the Odd Lots podcast, host Jill Wiesenthal and Tracy Alloway discuss the bond market and the intricacies of fixed income investing. They explore the concept of convexity and how it relates to trading fixed income and interest rates. The guest, Harley Bassman, a former PIMCO employee and now managing partner at Simplify Asset Management, provides insights on various fixed income instruments, including mortgage bonds. He shares his views on the current economic climate, inflation, and the possible actions of the Federal Reserve. Bassman explains the importance of understanding the relationship between stocks and bonds and highlights the role of options in the market. He also discusses the creation of ETFs that allow retail investors to access institutional-quality trading strategies.

Duration vs credit vs convexity

04:00

Understanding the Impact of Zero-Day Options Trading on Market Volatility

01:57

Investing in Mortgage Bonds as Fixed Income Investment

01:13

Intro

2min

Navigating Bond Market Volatility

10min

Navigating Bond Investments and Market Volatility

7min

Navigating Mortgage Bonds

9min

Understanding the Inverted Yield Curve and Its Economic Implications

3min

Navigating Bond Market Complexities

16min

Navigating Complexities in Bond Market Strategies

3min

Harley Bassman, a.k.a. the Convexity Maven, is a legend among bond investors. He worked at Merrill Lynch, where he invented the MOVE Index that measures bond market volatility, and then at Pimco. Now, after a dramatic year for US Treasuries that saw investors hit with massive amounts of volatility only for the 10-year yield to basically wind up where it was at the start of 2023, he sees things starting to get a bit more normal. With the Federal Reserve getting closer to its 2% inflation target, the yield curve is going to steepen after years of intense inversion, he says. Now a managing partner at Simplify Asset Management, Bassman also talks about his favorite trades for 2024, Fed Chairman Jerome Powell's legacy, and how he chooses his famously esoteric chart colors.

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