Flash: higher rates are more manageable than higher rate volatility – JP Morgan

FXstreet.com (London) - The Global FX research team at JP Morgan explains that the global bond sell-off is the third worst of the post-Lehman era in yield terms, but the most disruptive judged by the rise inequity/rate/FX volatility and contagion to EM.

They added that disorderly markets are much more problematic or alpha generation than environments of rising Treasury rates or tighter Fed policy. Historically, they say, fund managers have been able to generate decent returns when rates normalise but not when rate vol surges. The team thinks treasury volatility should peak soon barring a major upside surprise on payrolls, but JGB stability is harder to forecast since that market is in the early stages of price discovery under a new BoJ regime.