Thursday, 10 October 2013

Chart of the Day - Volatility of Euro Zone peripheral yields

"Anyone who attempts to generate random numbers by deterministic means is, of course, living in a state of sin."- John von Neumann 

As pointed out by our good cross-asset friend, now that realized volatility of the US 10 year bond is superior to the ones of Italian BTPs and Spanish Bonos, although there is a significant yield difference (+150 bps), risk models/allocation models using historical VaR are going to soon love peripheral bonds relative to US Treasuries.

From CITI & FT:

Bloomberg recent Chart of the Day from the 9th of October display a similar pattern but emphasizes on the rise of the Euro:
"The CHART OF THE DAY shows the euro has strengthened to an eight-month high against the U.S. currency as a measure of Spanish and Italian bond yield swings dropped below that of Treasuries last month for the first time in at least a year. At the same time, Treasury volatility has risen as U.S. lawmakers remain deadlocked over the budget and investors debate when the Federal Reserve will trim its dollar-debasing stimulus program...The volatility of Spanish 10-year yields as measured by the 65-day standard deviation, a study of how much the rate has moved each day compared with the average change, was 4.96 basis points on Oct. 3, versus 6.01 basis points for the benchmark Treasury. As recently as May, the measure for Spanish bonds was more than double its U.S. equivalent. The volatility of Italy’s 10-year yield was 5.24 basis points. " - source Bloomberg

"I don't write a great song every day. I don't write a great song every couple weeks. It comes in such random times." - Macklemore 

Stay tuned!

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