The market in US Treasuries, source of the bedrock rates that underpin all other financial markets, has been a little less volatile this year, following an extraordinary couple of years when daily moves of 20 basis points became common.
Investors may still be shifting expectations almost daily on the timing and speed of coming US Federal Reserve policy decisions, jumping at every new piece of financial data, but there is at least less uncertainty on the likely direction of rates.
The Merrill Lynch Option Volatility Estimate (Move) index – the bond equivalent of the VIX for equities – has come down from 127 at the start of January to 100 at the start of June.
That is close to half the level of its recent high of 180 in March 2023. However, it is still double the level of 49 in January 2020, on the eve of the pandemic.
A new level of bond-market volatility has become the day-to-day reality for investors and dealers amid higher-for-longer rates.
Closely attached to the US Treasury market are the vast outstandings in mostly overnight as well as in term repurchase agreements (repo).
The
