Interest Rates and the MOVE Index

We keep hearing that long term Treasury Bonds are going to tank and that we need to get short before they fall off a cliff. While this may very well happen, we doubt that it occurs anytime soon. We are not alone in this view as Bill Gross and the gang at PIMCO seem to agree. While some argue with his view of a new slow growth period the market does not seem to have an issue with it. Not only has Helicopter Ben said that the Fed is not raising rates anytime soon, but market indicators are saying the same thing.

One Treasury indicator that we use is the MOVE index which is a “yield curve weighted index of the normalized implied volatility on 1-month Treasury options. It is the weighted average of volatilities on the CT2, CT5, CT10, and CT30.” As you can see in the chart below it has been falling since July as the market has come to the realization that we are in for a slow growth period and that the Fed is not going to raise rates any time soon.

MOVE Index

move-treasury-volatility-index

Happy Trading,

Dave@TheMacroTrader.com

Disclaimer-The Macro Trader is currently long AGG

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