Interest Rate Forecasting in a Volatile Time
In the movie Crispin Glover plays a bellhop at a ski resort. When we are introduced to him, it is 2010 and he has lost his right arm. As the story unfolds, the main characters go back in time to 1986 to the same ski resort. Here we see our bellhop with both limbs, fully functional. There are numerous episodes with chainsaws and nasty elevators that put the bellhop’s limb in danger. Because we know the eventual result, each time we have a heightened anticipation (as do the time travelers in the movie) that “this is the moment when it happens”– but then it doesn’t happen. We almost feel disappointed for a moment, but then things ease back to normal.
I see that as a metaphor for the bond market today. We all KNOW rates are going up….and up significantly (just as surely as our bellhop will lose his limb). This space has given all the WHYs for months (end of the Fed’s MBS Purchase Program and inflation being the main culprits). The real questions now center around “WHEN will it happen?” and “HOW DRAMATIC will the movements be?”
