We use the CBOE MOVE index for 10-year Treasuries as a good measure for volatility expectations, similar to the VIX for equities. It is an option-based measure of market volatility expectations. The MOVE index in March reached levels last seen during the bond temper tantrum; however, these index numbers never reached the levels seen during the Great Financial Crisis. The spike was also lower than the bond jump in 2003.
The MOVE volatility index is now lower than late 2018 and mid 2019 levels and currently does not suggest an abnormal market environment. The MOVE will increase on the latest unemployment numbers; however, can we really say the world is now normal given trillions of Fed purchases of Treasury debt and similar increases in Treasury issuance.
As fast as the Treasury issues, the Fed buys and the private market participants are not the marginal buyers or sellers. What we can say is that a flood of central bank liquidity and large Fed purchases will dampen any change in expectations from private investors. There are only price information signals on central bank behavior, nothing more.
The MOVE volatility index is now lower than late 2018 and mid 2019 levels and currently does not suggest an abnormal market environment. The MOVE will increase on the latest unemployment numbers; however, can we really say the world is now normal given trillions of Fed purchases of Treasury debt and similar increases in Treasury issuance.
As fast as the Treasury issues, the Fed buys and the private market participants are not the marginal buyers or sellers. What we can say is that a flood of central bank liquidity and large Fed purchases will dampen any change in expectations from private investors. There are only price information signals on central bank behavior, nothing more.
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