While interest rates remain steady, change in Washington often means change in perspective and direction. If the stimulus bill is passed, what happens if the market starts to feel interest rate pressure again? Let’s look back to the a recent interest rate market event and how risk managers were able to react to it.
The two months of June and July of 2019 brought unforeseen volatility into the interest rate arena. During this period, the Federal Reserve did an ‘about face’, regarding the direction of interest rates in the US. This came as an unwelcome surprise to market participants as most traders, speculators and hedgers were prepared for a rising or unchanged interest rate environment, with very little attention paid to the thought of declining interest rates. This group- think caused a ‘rush to exits’ to reverse or close out existing positions.
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