Volatile trading in bond markets continued into Friday morning–a trend that can sideline some investors who find that directional bets now entail more risk than they can afford to take on, said John Madziyire, senior portfolio manager at Vanguard.
In recent trading, the 10-year note was yielding 3.095%, compared with 3.066% at Thursday’s settlement. Earlier in the morning, trading took yields as high as 3.128% and as low as 3.042%, according to Tullett Prebon data, as investors digested the latest jobs data. Bond yields rise as prices fall.
When yields swing around by that much, bets on bond-price moves can produce larger losses if they go wrong, keeping some investors out of the market.
“In a normal environment, with bond yields trading in a range of about 2 basis points a day, you can afford to have a risk position of X size. When volatility goes up, if you have the same X position on, you could potentially lose a lot of money,” Mr. Madziyire said. (A basis point is 0.01 percentage point.)
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