With the beginning of the global interest rate easing cycle, price fluctuations in the fixed income market have finally begun to subside. Previously, the implied volatility of the fixed income market reached its highest level since 2008.
The Zhitong Finance App learned that Goldman Sachs Group's data shows that with the beginning of the global interest rate easing cycle, price fluctuations in the fixed income market have finally begun to subside. Previously, the implied volatility in the fixed income market reached the highest level since 2008.
Strategists including Joseph Briggs wrote in a report that historical data shows that “once interest rate cuts begin, policy interest rates are close to long-term levels,” and the bond market for the next 12 to 24 months may be less susceptible to fluctuations caused by unexpected economic data. They said that the trajectory of inflation would also dampen market reactions.
The US market is already beginning to reflect Goldman Sachs's views. The ICE - BofA MOVE index of US Treasury options volatility surged at the beginning of last year and has roughly returned to the level before the Federal Reserve (which began raising interest rates in 2022).
Even so, given that current interest rates are generally higher than those of a few years before the pandemic, “the market's sensitivity to unexpected data is more likely to return to the average level before the global financial crisis than the low level of the previous cycle,” the strategists said.