Turbulence in Bonds Is Finally Abating, Goldman Economists Say
- Lower interest rates will lead to drop in sensitivity
- Volatility in Treasury options is already beginning to decline
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Price swings in fixed-income markets that sent implied volatility to the highest since 2008 are finally subsiding as the global interest-rate easing cycle kicks in, according to Goldman Sachs Group Inc.
Historical data suggest the bond market is likely to become less prone to swings caused by economic-data surprises in the next 12 to 24 months, “once rate cuts begin and policy rates move closer to their longer-run levels,” strategists including Joseph Briggs wrote in a note. The inflation trajectory should also dampen reactions, they said.