‘It’s All Choppy’: Pimco, DoubleLine, BlackRock Embrace Bond-Market Swings

Trading in bonds these days means having to put up with more frequent market gyrations — and that’s just fine with big investors like Pimco and BlackRock Inc.

Increased volatility has been a feature in the Treasury market for the past two years, as spiraling inflation, Federal Reserve interest-rate increases, mixed economic signals and stepped-up government borrowing all combined to keep investors on edge. This contrasts with the numbing conditions that prevailed for much of the prior decade amid the heavy hand of central-bank support.

Now, even as some of that turbulence subsides with Fed rate cuts on the horizon, volatility remains elevated. The uncertainty around the timing of reductions and path for the economy leaves plenty of room for big market swings and opportunities to profit from them.

“We really like this environment,” said Daniel Ivascyn, chief investment officer at Pacific Investment Management Co. “The tendency for some overshooting in rates in both directions allows us to express tactical views.”

Treasury Volatility Nears Floor of Past Two Years

The average and median daily swing in the US 10-year yield has drifted downward this year, to less than 0.08 percentage point, according to Bloomberg calculations. While that is more muted than the activity during the prior two years, the overall trend remains the highest since 2011, the calculations show, and marks an important shift.