4 ms·
What's also interesting this time is the relationship between bond markets and modern ETFs. Especially in Europe, ETFs can be synthetic. In some cases this mea
by unknown_apostle 8y ago
What's also interesting this time is the relationship between bond markets and modern ETFs.
Especially in Europe, ETFs can be synthetic. In some cases this means they're made up of generic filler material (e.g. German bunds), with some secret hobo spices (derivatives) to provide the ETF's specific flavouring.
Because of 10 years of central bank buying, all these bonds have been priced to perfection for deflationary scenarios. And as the world is mostly calibrated for small, well-announced yield changes, I wonder what an unexpected discontinuous "jerk" in yields would do to such ETFs.