Odd Lots Josh Younger Explains Why the Bond Market Has Been So Volatile
Jul 11, 2022
Josh Younger, Managing Director and Global Head of ALM Research and Strategy at JPMorgan, dives into the tumultuous world of the bond market. He discusses the unexpected volatility in U.S. Treasuries, particularly following interest rate hikes from the Federal Reserve. Younger explores the liquidity issues exacerbated since the March 2020 sell-off and shares insights on high-frequency trading impacts. He emphasizes the need for regulatory reforms to stabilize the market and minimize future disruptions, shedding light on a traditionally calm sector turned chaotic.
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Treasury Volatility
- Treasury market volatility comes from rapid fundamental shifts and market functioning issues.
- These issues exacerbate price changes beyond fundamental reasons, hindering risk transfer.
Low Market Depth
- Market depth, the size tradable near the current price, is low in the Treasury market.
- This low depth implies difficulty in transferring risk without significant price impact.
March 2020 Selloff
- The March 2020 Treasury selloff stemmed from a market functioning issue, not just illiquidity.
- The urgency arose from uncertainties, like potential market closures, forcing a dash for cash.