Fed's Drop of Forward Guidance Leads to Higher U.S. Rate Volatility
Dow Jones07-31 14:23
0623 GMT - The Federal Reserve's withdrawal of forward guidance is ushering in structurally higher U.S. rates volatility which is also impacting other developed-market bonds, BNY's David Tam says in a note. The MOVE index--a key measure of Treasury-market volatility--has strong historical correlations with non-U.S. sovereign bond yields and points to a clear cross-border transmission mechanism, he says. Developed-market sovereign bonds are particularly exposed. "Their tighter integration with U.S. rates means a rising volatility environment could lead yields to spike and trigger a selloff," he says.
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