What's the Big Idea? Beware the Bond Shock

The video discusses a spike in bond yields following a strong US payrolls report, highlighting the potential for a value at risk (VAR) shock. VAR shocks occur when asset prices deviate from long-term averages, causing market participants to adjust their trading strategies, potentially leading to a vicious cycle of selling. Historical examples include the 2013 Japanese government bonds and US Treasurys taper tantrum. JP Morgan identifies common factors in recent bond shocks, such as quantitative easing suppressing volatility and encouraging risk positions. The video also examines liquidity and volatility trends, emphasizing the importance of supply and demand dynamics in assessing market risks.

In what way do market participants need to adjust their strategies during a value at risk shock?

What historical events are mentioned as examples of bond yield shocks?