Treasuries’ Volatility Slump

The ICE BofA MOVE Index, which tracks implied price swings in Treasuries over the next month, is around its lowest since February. The 10-year yield’s range this past week, of just under 9 basis points, was the narrowest since January. This month, the rate reached as low as 1.46% on the unexpectedly weak labor data, and peaked at 1.7% in the wake of a surge in consumer prices.

“This type of range trading will last until we have some level of confidence for the trajectory of the economy. As far as inflation, most clients already expect persistence of high inflation prints for the remainder of the year.”

Subadra Rajappa, Head of US Rates Strategy at SocGen

Subadra Rajappa at Societe Generale and Gregory Faranello at AmeriVet Securities say the next chapter in solving that puzzle may not come until early June with the release of monthly jobs data. The fresh take is especially important given the Fed’s focus on the labor market and after the previous report was much weaker than forecast.

Reference

Bloomberg, 2021-05-23, “Bond Traders in Limbo on Yields’ Path With Volatility Slumping”