JPMorgan Chase & Co. creates ‘Volfefe’ Index to track the Trump tweet impact

Last Updated: Sep 10 2019 14:42
Reading time: 0 mins, 54 secs

Analysts at JPMorgan Chase & Co. have created an index to gauge the impact of Donald Trump's tweets on U.S. interest rates, which they say is on the rise.

The ‘Volfefe Index’, named after Trump’s mysterious ‘covfefe’ tweet, suggests that the president’s tweets are having a statistically significant impact on Treasury yields. The number of market-moving Trump tweets has ballooned in the past month, with those including words such as ‘China,’ ‘billion,’ ‘products,’ ‘democrats,’ and ‘great,’ most likely to affect prices, the analysts found.

“Trade and monetary policy have become an increasing focus for the executive branch, and everything from casual sentiments to seemingly formal policy intentions have been disseminated, globally and instantaneously, via this carefully scrutinized social media platform,” analysts led by Josh Younger and Munier Salem wrote. “In response, a broad swath of assets from single-name stocks to macro products have found their price dynamics increasingly beholden to a handful of tweets from the commander in chief.”

They found that the Volfefe Index can account for a “measurable fraction” of moves in implied volatility, seen in interest rate derivatives known as swaptions.