60 seconds on why bond volatility brings opportunity
Diverging monetary policy
The rest of 2015 could an exciting time in the bond market.
We have two contrasting features which will influence what happens:
1. The amount of liquidity that continues to be pumped into the financial system by central banks around the world. For example, the European Central Bank has launched a trillion dollar quantitative easing programme.
2. The Federal Reserve (Fed) is expected to raise interest rates by the end of this year. The market fully expects the Fed to raise rates by December, if not September.
Volatility creates opportunity
Those two counteracting forces have the potential to create volatility for the remainder of the year, which creates opportunity for active fund managers.
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