U.S. Rates Volatility on Policy Uncertainty Roller-Coaster Ride

A surge in U.S. rates volatility faces the uncertain life expectancy of an ageing business cycle.

The market is tilting toward a more conventional easing cycle from the Fed rather than a scenario of just insurance cuts. That means that volatility can move higher, especially if recessionary impulses force policy makers to cut to zero. If, on the other hand, the Fed and the economy convince the market into pricing an insurance-easing scenario, then short-term rates volatility will decline.