{"id":576,"date":"2019-09-09T22:50:14","date_gmt":"2019-09-09T22:50:14","guid":{"rendered":"https:\/\/jobbinghood.com\/finance\/2019\/09\/09\/j-p-morgan-made-a-volfefe-index-to-track-how-trump-tweets-move-the-bond-market-heres-what-it-shows\/"},"modified":"2019-09-09T22:50:14","modified_gmt":"2019-09-09T22:50:14","slug":"j-p-morgan-made-a-volfefe-index-to-track-how-trump-tweets-move-the-bond-market-heres-what-it-shows","status":"publish","type":"post","link":"https:\/\/jobbinghood.com\/magazine\/2019\/09\/09\/j-p-morgan-made-a-volfefe-index-to-track-how-trump-tweets-move-the-bond-market-heres-what-it-shows\/","title":{"rendered":"J.P. Morgan made a \u2018Volfefe\u2019 index to track how Trump tweets move the bond market \u2014 here\u2019s what it shows"},"content":{"rendered":"

[ad_1]
\n<\/p>\n

\n

A single tweet by U.S. President Donald Trump helped bring home the bacon for bond investors in August. <\/p>\n

Indeed, the bond market roared higher last month, sending yields down<\/a>, notably after President Donald Trump pledged to impose tariffs on all remaining Chinese imports, and as his Twitter activity picked up the pace.<\/p>\n

So what are his tweets really doing for U.S rates markets? That\u2019s what J.P. Morgan\u2019s Volfefe Index, a play on that Trump \u201ccovfefe\u201d typo from two years ago<\/a>, aims to find out. Munier Salem, vice president of the bank\u2019s U.S. interest rate derivatives strategy and his team created the index to gauge how Trump tweets \u2014 10,000 since taking office \u2014 have influenced moves in implied rate volatility for two-year
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n TMUBMUSD02Y, +3.13%<\/span><\/a><\/span>
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n and five-year
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n TMUBMUSD05Y, +4.59%<\/span><\/a><\/span>
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n \u00a0Treasury notes. <\/p>\n

<\/p>\n
\n \"\"\/
\n
\n
\n \n <\/div>\n


\n
\n <\/figure>\n

The index explains a \u201cmeasurable fraction\u201d of moves in implieds, particularly in shorter tails, that is 2-year rates and 5-year rates, as opposed to 10-year rates. Digging into the Twitter stream, they say the most impactful tweets have focused on trade, with those mentioning monetary policy of lesser influence. \u201cChina,\u201d \u201cbillion\u201d and \u201cproducts\u201d were among words topping the list on those market-sensitive tweets. <\/p>\n

<\/p>\n
\n \"\"\/
\n
\n
\n \n <\/div>\n


\n
\n <\/figure>\n

Their model finds that out of around 4,000 non-retweets occurring during market hours from 2018-present, only 146 moved the market. And quality is not quantity as they note that the Volfefe index \u201dstrongly outperforms the sheer tweet count in periods headed into substantially elevated implied volatility.\u201d <\/p>\n

The bank\u2019s research follows a report from Bank of America Merrill Lynch last week that found if Trump stays off the Twitter platform, the stock market fares better<\/a>.<\/p>\n<\/p><\/div>\n

[ad_2]
<\/p>\n