Source: Bloomberg

Author: Liz McCormick, Michael Mackenzie

A number of financial markets have gone through a crazy journey, but for the bond market, good news is that this fluctuations are only accidental phenomena, not this year's law.

Investors who are worried about the turbulent trend last year can actually be relieved.Although the restructuring of the trader to the Fed's interest rate path has sparked the yield of US bonds, the MOVE index that measures the hidden volatility of bonds is still near one year's low.The index was reported at about 111, a decrease of more than 30%from the peak in 2022.

A key factor behind this is that after the strong inflation and employment data were announced in January, the market's expected distribution of interest rates on the Federal Reserve is relatively concentrated.At present, monetary policy is basically hopeless.

Exchange traders expect the Federal Reserve to adjust the benchmark interest rate to about 5.3%by the end of July, and maintain more than 5%in 2023.After raising 25 basis points this month, the Fed's current target interest rate range is 4.5%-4.75%.Infay interest rate hikes will bring pain to the economy, but also indicate a more stable yield of risk -free benchmark bonds.

Praveen Korapaty, the chief interest rate strategist of Goldman Sachs, said, "The volatility will continue to decline, which is very important for the market. This year's yield will rise, but this will be a gradual process. It will not be like what we see last year.That way. This will be re -priced to low volatility. "

The weakening rate of yield fluctuations is beneficial to the real economy and overall financial assets. More than 5 trillion US dollars in the world regards US debt yields as risk -free benchmarks for pricing.

KOORAPATY said that "the decline in interest rate volatility should reduce the risk premium of some assets, which means that the valuation will become better in terms of price."He expects the 10 -year US Treasury yield to reach 4.2%

Goldman Sachs Economist predicts that the Fed will raise the policy interest rate to 5%-5.25%by May and maintain it for about one year.

Strategic and economists from Bloomberg survey predict that the 10 -year US debt yield will reach 3.4%at the end of the year, slightly lower than the current level of about 3.76%.

Oakmark Bond Fund Co -Investment Portrait Manager, Harris Associates Fixed Revenue Co -Director Adam Abbas said, "We may enter a narrower yield range within this year",

However, some people are worried that the high fluctuation environment will continue before the end of the Fed's end.

Mike Schumacher, the macro -strategy leader of Fickings Securities, said, "Before the Fed issued a deflation action, it is difficult for the market to have a significant decline in the market."

But the managing director of the multi -asset solution of hedge fund giant Man Group Peter Van Dooijeweert said he believes that the turbulent situation in the bond market in 2022 will not be re -enforced this year.