President Donald Trumps election-related tweets are likely to drive volatility in the U.S. Treasury market, according to the JPMorgan Chase & Co. analysts who created the Volfefe Index.
Named after Trumps mysterious “covfefe” tweet from May 2017, the index seeks to gauge the impact of the presidents tweets on the worlds biggest funding market by tracking moves in interest-rate options.
“Presidential tweeting remains a statistically significant driver of volatility and options pricing in interest rates,” JPMorgan analysts Henry St John and Joshua Younger wrote in a note cited by Fox News. “Should the topic of those pronouncements turn to topics to which markets have been more sensitive ‒ Covid-19, the election, and geopolitics, for example ‒ it could be a bullish factor for volatility heading into November.”
Analysts at JPMorgan created the measure in September 2019, with Bloomberg reporting at the time that the analysts found the Volfefe Index accounted for a “measurable fraction” of moves in interest rate derivatives known as swaptions, with a larger impact on shorter-term government securities like two- and five-year Treasury notes.
Other analysts have also sought to gauge the impact of Trumps tweets on markets, with Citigroup quantitative foreign-exchange strategist Sukrita Chatterji telling Bloomberg shortly after JPMorgan launched the Volfefe Index that Citis own analysts found that the presidents missives on Twitter were typically followed by a period of higher volatility in global currency markets.
Noah Hamman, AdvisorShares CEO, told Yahoo Finance in a Sept. 25 interview that Trumps recent remarks about the possibility of a contested presidential election could also drive volatility in stocks.
“Itll increase the volatility,” Hamman said, adding that while he hopes the result of the election will be “definitive” and it wont be adjudicated by the Supreme Court, he added that, “people and investors are bracing for volatility.”
The VIX volatility gauge, often dubbed the Wall Street fear gauge, which tracks implied volatility in the benchmark S&P 500 equities index, shot up by about 10 percent on Sept. 23, the day Trump, at a press briefing, declined to endorse an orderly transfer of power.
When asked about whether he would “commit here today for a peaceful transferal of power after the November election,” Trump said it isnt clear what will happen.
“Were going to have to see what happens,” he said. “You know that Ive been complaining very strongly about the ballots, and the ballots are a disaster.”
The president has often expressed concerns about voter fraud amid a surge in mail-in voting as well as nationwide riots and unrest.
Later, on Sept. 24, Read More – Source