Premium"The Nightmare Scenario": MOVE Creator Bassman Warns The 20Y At 6% Could Unleash "Convexity Vortex"
For the first time since early 2007, the plain-vanilla Treasury bond future is behaving like a mortgage bond.
That is the warning from Harley Bassman, creator of the famous MOVE index of bond volatility and the bond market's resident "Convexity Maven," who in his latest letter, "A Fat Cat in a Small Door," argues that the nearly $200 billion CBOT bond contract has become "significantly Negatively Convex," and that this little-understood piece of plumbing "has likely been a contributor to the recent rapid increase in interest rates as so many Fat Bond Traders simultaneously try to squeeze through a Small Liquidity Door."