What's the Big Idea? Beware the ‘Convexity Hedging Beast’

The video discusses the factors influencing bond market movements, focusing on convexity hedging. It explains how falling bond yields affect portfolios, particularly those holding mortgages, and how money managers and banks use convexity hedging to manage these changes. This hedging can exacerbate interest rate movements, as seen in recent bond rallies. The video also highlights the potential for further declines in bond yields due to ongoing hedging activities, with insights from TD Securities and JPMorgan.

What evidence is provided in the text to suggest that convexity hedging is currently taking place?

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What are the potential implications of prolonged low bond yields as mentioned by JPMorgan analysts?

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