The MOVE Index measures potential volatility in the US Treasury market. It is calculated from the prices of options on US government bonds with different maturities. The lower the index value, the calmer the market, the more predictable the Fed’s policy, and the higher investor confidence. A high reading points to growing uncertainty and risk, and traders often take it as a signal to move into safe-haven assets or adopt a wait-and-see strategy.
The MOVE Index is often read alongside the VIX volatility index. Both track market sentiment, but in different markets. The MOVE covers US government bonds, and the VIX covers stocks. This overview explains what the MOVE Index shows and how to use it in trading.
The article covers the following subjects:
Major Takeaways
- The MOVE Index indicates expected volatility in the US Treasury market. It measures the state of the debt market and indirectly reflects uncertainty in the stock market.
- A low MOVE value (below 60) indicates a relatively stable bond market. Values between 60 and 100 correspond to moderate volatility, while values between 100 and 140 indicate high volatility. A level above 140 signals extremely high bond market volatility and heightened uncertainty.
- A sharp rise in the MOVE Index can reduce investor confidence in financial market stability and encourage a shift from high-risk assets, like stocks and cryptocurrencies, to safe-haven assets.
- The lowest recorded MOVE value stood at 36.6, and the highest one reached 264.6 in 2008.
- Bond and stock markets are closely linked, which is why the MOVE is often analyzed alongside the VIX, the stock market volatility index. The MOVE can be used as a leading indicator, though its increase does not necessarily mean that a stock market decline will follow.
What Is the MOVE Index?
The MOVE (Merrill Lynch Option Volatility Estimate) index measures the volatility that traders expect in the US Treasury market. It is the bond market’s version of the VIX index in the stock market and is calculated from the prices of options on US government bonds.
Please note:
- US Treasury bonds (T-Bonds) are long-term debt securities issued by the US Department of the Treasury to finance government spending and refinance existing debt. An investor lends money to the government and receives regular interest payments, plus the bond’s face value when it matures.
- An option is a financial contract, or derivative, that gives the buyer the right to buy or sell an asset at a set price, but does not oblige them to do it. That right lasts for a fixed period. If the buyer decides to use it, the seller must complete the deal. For this right, the buyer pays the seller a nonrefundable premium.
The bond market’s Fear and Greed Index was created in the 1990s by Harley Bassman, a trader at Merrill Lynch at the time. In 2019, the rights to the index and its calculation passed to ICE Data Indices, a division of Intercontinental Exchange (ICE), the American company that also owns the New York Stock Exchange (NYSE).
The index is calculated from the implied volatility of Treasury options, and it covers instruments tied to 2-, 5-, 10-, and 30-year bonds. The full methodology belongs to ICE Data Indices and has never been disclosed.
Unlike the VIX, which is expressed in percentage points, the MOVE is measured in basis points of annualized yield volatility. Its creator, Harley Bassman, suggested a simple way to read it: divide the current value by 16, roughly the square root of the number of trading days in a year. The result is the daily move in bond yields, in basis points, that the market expects.
For example, if the MOVE Index stands at 100, the market expects Treasury yields to move by about 6.25 basis points a day (100/16).
The MOVE Treasury Volatility Index does not indicate the direction of yield movement but reflects the magnitude of its anticipated fluctuations. At a reading of 50, the market expects yields to shift by about 3.12 basis points a day. At 100, that figure doubles to 6.25.
Treasury yields serve as the risk-free benchmark for pricing stocks, corporate bonds, and loans in global financial markets. So when the MOVE Index jumps, the cost of money itself becomes harder to predict. Banks and funds respond by cutting leverage, raising margin requirements, and pulling capital out of risky assets.
How the MOVE Index Works
The US government bond market is a key element of the global financial system. Therefore, a steep rise in the MOVE Index may be accompanied by increased volatility in the stock, gold, and currency markets. An increase in the index signals that market participants expect greater fluctuations in Treasury bond yields, and liquidity in financial markets may decline.
MOVE Index levels interpretation:
- Below 60: Low volatility. The Treasury market is quiet, and rate expectations hold steady.
- 60–100: Moderate volatility. Market conditions are still calm, and investors expect only modest swings in bond yields. Readings may climb toward 100 when uncertainty picks up, for instance before Fed meetings or major macroeconomic releases.
- 100–120: Elevated volatility. Investors are more actively revising their expectations regarding interest rates amid uncertainty surrounding the US Fed’s decisions and inflation risks.
- 120–150: High volatility. Negative sentiment and uncertainty both intensify. Inflation and policy forecasts can shift abruptly, and problems in the banking system may surface.
- 150–180: Very high volatility. Such readings appear during liquidity crises and market panic, when the central bank may resort to emergency unconventional measures.
- Above 180: Extreme volatility. Possible during exceptional events: a global financial crisis, a regional banking crisis, or a pandemic.
During the 2008 financial crisis, the index value exceeded 264. During the 2020 pandemic, the MOVE Index surpassed 160. At that time, the US Treasury bond market experienced serious liquidity issues.
The index reached its all-time high of 264.6 in 2008, while its lowest point was 36.6.
MOVE Index vs VIX
Both indices help assess current volatility relative to previous periods. The main difference lies in the underlying markets:
- The VIX Index (CBOE Volatility Index) reflects the expected volatility of the US stock market.
- The MOVE Index reflects the expected volatility of US Treasury bond yields.
During market turmoil, both indices can shoot up. However, they do not always move in sync, as equity market risks and interest rate risks in the debt market depend on different economic factors.
Key differences and correlations:
- A rising VIX means traders expect wider swings in stocks, and it usually comes alongside falling share prices and a retreat from risky assets. A rising MOVE means rising uncertainty regarding interest rate trends.
- MOVE is a leading indicator. The bond market reacts quickly to macroeconomic data and to shifts in expectations about monetary policy. For that reason, a rise in the MOVE sometimes comes before a rise in equity volatility. When bond volatility climbs, companies may face a higher cost of capital, which can weigh on share prices and, in turn, push the VIX up.
Candlesticks on the chart represent the MOVE Index, and the blue line shows the VIX.
In 2022, the US Fed aggressively raised interest rates. Amid this monetary policy tightening, volatility in the government bond market (MOVE) increased, and Treasury yields fluctuated rapidly. However, equity market volatility (VIX) did not always move in tandem with the MOVE. This case is examined in detail in the following section.
How to Read the MOVE Index Chart
A low index value indicates low expected volatility in the US Treasury market. Macroeconomic conditions are relatively stable, and the Fed’s actions are generally in line with market participants’ expectations.
When the economy shifts abruptly, whether through a force majeure or black swan event, macroeconomic data can deviate sharply from forecasts. Inflation accelerates, unemployment climbs, or liquidity in the banking system dries up. The MOVE Index then rises, signaling growing uncertainty in the fixed-income market, and investors tend to reduce their positions in risky assets and watch for the Fed’s next move.
When the MOVE Index enters the zone of extreme volatility, it signals deep uncertainty in the debt market and can be accompanied by stock market volatility. A high reading does not, by itself, mean share prices are bound to fall. In a crisis, the Fed may step in to keep liquidity flowing through the financial system. A decline in MOVE after a spike in volatility indicates market stabilization and may be viewed as an indirect signal to return to the stock market.
For example, the 2020–2021 pandemic disrupted supply chains and hurt production in many countries, driving up prices. By mid-2021, annual inflation in the US had exceeded 5%, climbing well above previous years' levels.
US Inflation Change
Despite high inflation, the market showed no signs of widespread panic. Investors believed the situation would remain under control, and the MOVE Index hovered between 70 and 80, indicating moderate volatility.
However, inflation continued to rise toward the end of 2021. In response, the central banks of the US and the Eurozone began planning monetary policy tightening. The Fed started raising interest rates in March 2022, and the European Central Bank followed suit in July 2022.
The US began lifting interest rates in the spring of 2022. Market uncertainty intensified: investors were unsure whether inflation could be curbed and how long the Fed would continue to raise rates. The MOVE Index moved into the 100–130 range, reflecting heightened volatility in the bond market and uncertainty regarding the Fed’s future actions. As volatility in the bond market grew, the US stock market started to decline.
Trouble in the US banking sector started to surface toward the end of 2022. High inflation and rising interest rates had eroded the value of bonds and other fixed-income securities that banks had bought when rates were low. As deposits flowed out, some banks had to sell those assets at a loss to stay liquid.
The collapse of the cryptocurrency market added to the strain. A handful of banks worked closely with crypto companies, so the industry crisis and the outflow of client funds increased the risks to their business.
In March 2023, three US banks ran into trouble at the same time. Silvergate Bank announced a voluntary liquidation, while regulators shut down Silicon Valley Bank and Signature Bank. The failures set off a regional banking crisis in the US, and the Fed and other regulators responded with emergency measures to contain it.
Europe faced similar problems. Credit Suisse reported its largest annual loss since 2008, and in March 2023, as confidence in the bank kept draining away, UBS acquired it with backing from the Swiss government.
By the time the banking crisis began, the MOVE Index was around 100.
The banking crisis in the US triggered significant uncertainty in financial markets. In March 2023, the MOVE Index approached 200, indicating extremely high expected volatility in the Treasury bond market. By the end of 2023, the index had dropped considerably from its March peak.
In early 2023, the stock market was close to the previous year’s lows, reached amid elevated MOVE Index readings. Throughout 2023, the market gradually recovered.
How Traders Use the MOVE Index
The MOVE Index is a market sentiment indicator that reflects expected volatility in the US Treasury market. The higher its value, the greater the uncertainty and the likelihood of sharp fluctuations in Treasury bond yields. An increase in the MOVE Index may also be accompanied by heightened volatility in other financial markets.
Different ways to use the MOVE Index:
|
MOVE Value |
Market Condition |
Trading Strategy |
|
Low (below 70) |
Calm market, predictable rates |
Buy stocks and open long trades in high-risk and potentially high-return assets. |
|
Moderate (70–100) |
Normal market condition |
Trade with the trend. Favor highly liquid assets with relatively predictable price movements, including blue-chip stocks. Monitor corporate reports that could increase volatility. Limit the proportion of high-risk assets in the portfolio. |
|
High (110–140) |
Market turbulence, uncertainty over Fed policy |
Exit high-risk assets, hedge risks, reduce or completely eliminate leverage, and shift to defensive assets. |
|
Extreme (above 140) |
Systemic liquidity crisis |
If possible, close positions in highly volatile assets, shift to defensive assets, or exit the market. Look for opportunities to open long trades after the price bottoms out and the MOVE Index returns below 100. |
- Using it as a leading indicator for the stock market. Volatility in the bond market sometimes begins to rise before volatility in the stock market. A sharp increase in the MOVE while the VIX remains at low levels can therefore serve as an early signal for traders. Such a divergence points to growing uncertainty in the bond market, which may later spread to equities.
- Predicting the Fed’s actions. A sharp rise in the MOVE Index, and in particular a move above 140, indicates high volatility in the Treasury market and may be accompanied by a deterioration in liquidity. In a crisis, the Fed may take steps to stabilize the financial system, including the provision of additional liquidity. A specific MOVE level on its own, however, does not make it possible to predict what the regulator will decide.
- Using it as a benchmark for crypto traders. US Treasury bonds are considered one of the most reliable financial instruments available. A surge in volatility in the debt market may therefore be accompanied by a decline in investor interest in high-risk assets. If uncertainty rises even in the market for Treasury yields, sentiment in riskier markets is likely to deteriorate as well.
- Searching for entry points after the market stabilizes. Following a spike, a sustained decline in the MOVE may indicate that uncertainty over interest rates is easing and that the Treasury market is settling down. A return below 100 can be viewed as one sign of normalization and of potentially rising interest in riskier assets such as stocks and cryptocurrencies. A drop in the MOVE Index is not a standalone buy signal, though. It is assessed together with the VIX, government bond yield trends, and other fundamental indicators.
- Hedging. Higher interest rate volatility in the debt market usually means higher premiums on related options. An elevated MOVE value therefore points to a higher cost of hedging.
If the stock market remains steady and the MOVE Index rises, this may be an early sign of mounting uncertainty in the bond market. For example, investors may be anticipating changes in interest rates or other regulatory decisions, while the stock market has not yet reacted. Subsequently, this growing uncertainty may spread to the stock market as well.
Conclusion
The MOVE Index reflects expected volatility in the US Treasury market. Its movements can also indirectly gauge uncertainty in the stock and cryptocurrency markets. An increase in the MOVE Index, especially above 100–120, indicates rising volatility in the debt market and may prompt investors to adjust portfolio allocation by reducing high-risk assets.
The MOVE Index shows the magnitude of expected fluctuations in Treasury bond yields, but not their direction. The higher the reading, the larger the swings in yields that the market is pricing in. Across other financial markets, a sharp spike in the MOVE may point to mounting uncertainty and volatility. A simultaneous climb in both the MOVE and the VIX on higher time frames, such as daily and above, carries a similar warning.
The MOVE Index is not among the standard indicators on most trading platforms. Nevertheless, its current value and historical data are available on analytics websites.
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