Many of us are familiar with the VIX Index, commonly referred to as the “Fear Index”. The VIX Index is a measure of “fear” as that relates to equity markets and typically rises during periods of falling prices, sometimes sharply during more precipitous declines.

Did you know that there is a similar index that measures fear within the bond market? That index was developed by Merrill Lynch and is referred to as the “MOVE” Index. The index rises as concerns grow that interest rates are on the march higher.  The index will rise more sharply when there are fears in the market that rates may be headed significantly higher as was the case during the 2013 Taper Tantrum.

Since last week’s election, the bond market has experienced what could be referred to as a Trump Tantrum resulting in the index immediately spiking to near 90 before pulling back to its current reading of about 80.  The long-term index average is closer to 70. So far, this most recent surge seems comparatively modest and leads me to believe that the bond market has quickly adjusted to revised expectations of the Trump Effect, however, expectations and reality are 2 different things and it seems the bond market may have moved ahead of itself.

The MOVE Index can be a useful tool to measure bond market sentiment and should bear close monitoring in the days and weeks ahead.

MOVE Index Chart - 11/16/16

Volatility Index, which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking, is calculated from both calls and puts, and is a widely used measure of market risk, often referred to as the "investor fear gauge." The Merrill Lynch Option Volatility Estimate (MOVE) Index is a yield curve weighted index of the normalized implied volatility on 1-month Treasury options which are weighted on the 2, 5, 10, and 30 year contracts

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