Investors step up bets that US election will trigger market volatility

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Jitters sweep through bond and currency markets before presidential vote

Investors have been raising their bets that next week’s US presidential election will trigger sharp price swings in bond and currency markets. The Ice BofA Move Index, a closely watched gauge for future moves in the Treasury market, is up almost 40 per cent in October and hit its highest level in more than a year earlier this week. “The most realistic near-term risk is the outcome of the election,” said Steven Oh, global head of credit and fixed income for PineBridge Investments.

However, analysts said the index had been unusually high relative to realised volatility — the actual swings that take place in stock markets — in recent months, even before Thursday’s jump. The Vix “doesn’t look elevated, but if you compare it with realised volatility, it is very elevated . . . Implied vol is telling you the market perceives there to be plenty of risk,” said Binky Chadha, chief global strategist at Deutsche Bank.

 

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