World’s Most Important Market Needs Fixing Before It’s Too Late
The wild gyrations in Treasury securities are contributing heavily to the unease infecting investors. The Fed can help.
Worrying Signs.
Photographer: Michael M. Santiago/Getty Images North AmericaThe world’s most important market is broken. Rather than the measured temperature-takers of the economy, US Treasury securities are acting like panic-stricken children who claim to have heard something go bump in the night.
The yield on the benchmark two-year note has been swinging wildly, spanning an average of about half-a-percentage point between the highs and lows each day last week. A move of a couple of basis points is usually considered a lot for the security. Implied volatility as measured by the ICE BofA MOVE Index surged to the highest since late 2008, during the apex of the global financial crisis. Bloomberg News reported on Friday that veteran macro trader Adam Levinson is shutting down his hedge fund, the first high-profile casualty of the violent moves in fixed-income markets.