Interest Rate Volatility Is Compressing For The Next Move
Capital Flows
· Capital Flows
· July 02, 2026 at 04:53
· ⏱ 2 min read
| Read on Substack ↗
Summary
The article argues that interest rate volatility, equity correlation, FX, and credit have compressed into a single trade, eroding the traditional diversification benefit of a 60/40 portfolio. This convergence means a small move in one asset class now triggers moves across all, and the author promotes a video explaining the mechanics. A forthcoming livestream will explore whether China could crash the AI trade and drag down the Mag7, framing this as the next macro fault line.
•Bond vol, equity correlation, FX, and credit have collapsed into a single trade, so a small change in one now moves all of them.
•Rising real rates that fail to unwind equities signal more liquidity in the system, not less.
•The carry trade wires FX and rates together so compressed volatility pays a trickle and then pays back in a flood.
•Tomorrow's livestream will ask 'Could China crash the entire AI trade?' and focus on economic warfare and the AI arms race as the next repricing catalyst.