Volatility in US bonds is surging in stark contrast to the relatively placid run for equities, leading some analysts to warn over the danger that central banks trigger a spasm of volatility in Wall Street’s stock market.
Fixed income markets have been jolted by fears that rising inflation will force monetary policymakers into scaling back stimulus programmes, but stocks have largely shrugged off these concerns, with Wall Street’s main equities barometers rallying to a series of new record peaks last week.
The gap between measures of the near-term, derivatives-implied volatility of the S&P 500 benchmark and US Treasury bonds has widened at its fastest rate in a decade, according to Bank of America. Some analysts now warn that the divergence indicates investors are complacent about the risks posed by more hawkish central banks.