In Hamlet, Shakespeare wrote “Life is but a tale, told by an idiot, full of sound and fury, signifying nothing.” Would that it were so with the recent bond market sell-off. Instead, we see a move away from the flight-to-safety trade but also increasing inflation expectations, un-sustainable debt levels by the US government and severe distortions of the fixed income market by the Fed’s quantitative easing program. The latter has led to large amounts of convexity-related selling. These unwinds of Fed distortions have further to go, so fasten your seat belt.
Filed under: Fixed Income, Macro Policy, quantitative easing | 1 Comment »
