In the equity asset management world, the word risk is ubiquitously
interchangeable with the word "volatility" for myriad asset allocation
models that promise mathematical precision way beyond the realms of
possibility in a dynamic world. However, extending that definition of
risk, we thought it worth pointing out that, for the last month,
US Treasury bonds have become more volatile (more risky) than Italian and Spanish bonds. Something to ponder for The Fed's new head we suspect...
The 3 month volatility of US Treasuries is now higher than that of
Spain and Italy (both of which offer significantly higher yields than
the US)...
One can only imagine the automated overweighting that a lower risk,
higher return implies for the peripheral European bond markets... but
for all those MPT asset allocators out there, when all you have is
hammer...
