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Are Fixed-Income’s Calm Waters About to Get Choppy?

Keeping a close eye on Treasury market volatility

Volatility in the Treasury bond market is once again flirting with its recent lows. That could be good news—or it could be the forerunner of a bumpy road ahead.

As seen in the chart, the Merrill Lynch Option Volatility Estimate Index (ICE BofAML MOVE Index) —which measures the expected volatility of yields among Treasury bonds—fell below 100 last week (to around 98) and is hovering near its lowest level since September 2023. Greater stability in Treasury yields can boost confidence and clarity among equity investors about stock valuations, which can then help support higher stock prices.

Indeed, bond volatility’s recent path lower—realized volatility in interest rates on both the 10-year Treasury and the 2-year Treasury are close to their lowest levels since 2020—has been accompanied by a robust equity market.

The MOVE Index – Bond Market Implied Volatility

Source: Bloomberg, calculations by Horizon Investments, as of 3/15/2024. It is not possible to invest directly in an index.

But, the chart also highlights a potential trouble spot: The last few times the MOVE index has fallen below 100, bond market volatility has spiked shortly thereafter—often due to fresh evidence of higher-than-expected inflation.

So, what happens next? We expect the MOVE index to keep trending lower if the Fed’s policy becomes more clear, with the caveat that recent data suggests the Fed hasn’t yet decisively won its battle against inflation. The economic projections and comments following the Fed’s meeting this week will likely have an impact on where the MOVE—and, as a result, the stock market—goes from here.

This commentary is written by Horizon Investments’ asset management team. Past performance is not indicative of future results. Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security. This report does not attempt to examine all the facts and circumstances that may be relevant to any company, industry, or security mentioned herein. We are not soliciting any action based on this document. It is for the general information of clients of Horizon Investments, LLC (“Horizon”). This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any analysis, advice, or recommendation in this document, clients should consider whether the security in question is suitable for their particular circumstances and, if necessary, seek professional advice. Investors may realize losses on any investments. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. All investing involves the risk of loss.

The MOVE index, or Merrill Lynch Option Volatility Estimate Index, is a gauge of interest rate volatility in the U.S. Treasury market. It is calculated from options prices, which reflect the collective expectations of market participants about future volatility. You cannot invest directly in an index. References to indices, or other measures of relative market performance over a specified period of time are provided for informational purposes only. Reference to an index does not imply that any account will achieve returns, volatility or other results similar to that index. The composition of an index may not reflect the manner in which a portfolio is constructed in relation to expected or achieved returns, portfolio guidelines, restrictions, sectors, correlations, concentrations, volatility or tracking error targets, all of which are subject to change The investments recommended by Horizon Investments are not guaranteed. There can be economic times when all investments are unfavorable and depreciate in value. Clients may lose money. This commentary is based on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. The opinions expressed herein are our opinions as of the date of this document. These opinions may not be reflected in all of our strategies. We do not intend to and will not endeavor to update the information discussed in this document. No part of this document may be (i) copied, photocopied, or duplicated in any form by any means or (ii) redistributed without Horizon’s prior written consent. Forward-looking statements cannot be guaranteed. Other disclosure information is available at
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