If there isn’t an unexpected event or market shock that sends the U.S. bond market into chaos, it hasn’t been this wild in a long time.
Harley Bassman, who made the ICE BofA Move index and is now a managing partner at Simplify Asset Management, gave that reading based on the index.
Since late September, when the bond market started adjusting for a soft landing, the Move index has been going up. The recent event, on the other hand, seems to be the close race for president between Vice President Kamala Harris and former President Donald Trump. The bond market is getting nervous about this race because it’s so close.
“There have been times when the Move index was higher,” Bassman said of the barometer. The barometer, like the Cboe Volatility Index’s VIX (VIX 1.72%), or “fear gauge,” for the stock market, tracks activity in the options market to help give a single number to implied volatility.
BourseWatch spoke to Bassman on Monday. “But those were responses to things that happened in the market that we didn’t expect.” In 2007, when the U.S. housing market began to fall apart, the Move index was higher, as it was in 2020, when the COVID problem began.
Bassman didn’t say that the latest move was the highest ever. The Move went from being in the low 80s a few weeks ago to about 128 on Monday. The lead before the U.S. election, on the other hand, seems unusual when you look at “unknown knowns,” a word made famous by Donald Rumsfeld while he was secretary of defense under George W. Bush.
Bassman said that the most recent event was the Move’s biggest rise since the Gulf War in 1991, when Saddam Hussein was given 45 days to leave Kuwait or face an invasion by a combination of U.S.-led forces that was “certain to happen.”
The latest rise in the Move can be linked to the election on November 5 because it picked up speed when options that expire on November 7 were added to the index, Bassman said.
There are different monthly options for the 2-year Treasury yield (TMUBMUSD02Y 4.160%), the 5-year yield (TMUBMUSD05Y 4.149%), the 10-year yield (TMUBMUSD10Y 4.312%), and the 30-year yield (TMUBMUSD30Y 4.556%). The benchmark 10-year yield has twice as much weight because it usually drives bond prices.
Dow Jones Market Data says that the 10-year Treasury yield went up by 4.6 basis points to 4.277% on Monday. It has now gone up about 65 basis points since its low point in September.
If yields stay high for a long time, the U.S. government, businesses, and families may have to pay more to borrow money, and the economy may slow down.
There isn’t a message from the stock market, though, since the Vix has stayed below 20 and all three of the big equity indexes are close to new record highs.
FactSet says that the Dow Jones Industrial Average (DJIA) 0.65% went up 273 points, or 0.7%, to 42,387 on Monday. The S&P 500 index (SPX) 0.2% went up 0.3% and the Nasdaq Composite Index (COMP) 0.26% went up 0.3%.
Dec Mullarkey, head of investment strategy and asset allocation at SLC Management, said, “The cash market is more concerned with monetary and fiscal discipline, while the stock market is more concerned with growth.”
Even though the U.S. has a huge budget deficit of $1.8 trillion, neither candidate for president has made it a top goal to fix it. The deficit would grow by $7.5 trillion over the next ten years because of Trump’s plans for tariffs and tax cuts. The deficit would grow by $3.5 trillion because of Harris’s budget mix.
But, as BourseWatch’s Chris Matthews wrote on Monday, last-minute changes over the weekend have made both candidates’ plans cost about $12 trillion more than they originally planned. This is according to a report released Monday by the independent Committee for a Responsible Federal Budget.
