Rates correlations break down amid volatility surge

Rates traders often liken their market to a stool, with bonds, futures and swaps making up its three legs. Until recently, the relationship between those legs was stable, which allowed dealers to use them more or less interchangeably as hedges and provided a sanity check on pricing in any one instrument.

Inflation has crushed that stool.

“The term I hear over and over again from seasoned traders that work for me is that the market’s completely broken. Relationships have broken down that used