Where Does the Market See Risks?
The MOVE (Merrill Option Volatility Estimate) measures the implied volatility of 30-day bond options, from the 2-year note to the 30-year bond.
It is the "VIX of the bond market."
Today it closed at a one-year high, suggesting the bond market is pricing in upcoming volatility.
The VIX (Volatility Index) measures the implied volatility of at-the-money 30-day S&P 500 options.
While elevated, it is not near a new 1-year high like the bond market measure above.
Based on the two charts above, the bond market sees relatively more risk than the stock market.
Why?
The bond market sees more risk events over the next several days.
Oct payrolls Friday (Nov 1)
Election Day (Nov 5)
FOMC meeting next Thur (Nov 7)
October CPI on Nov 13
While these events will impact the stock market, they will affect the bond market more directly.
So, if you are wondering where the immediate risks are concentrated and where they will show up in the financial markets, right now, focus on the bond market.
If the bond market focuses more on coming risk events, consider its recent trend, as this 10-year yield chart shows.
Will these potential volatility events reverse this trend or accelerate it?
Associate Director, Risk for AG OTC Structured Products at RJO
4 个月Does MOVE give information on call/put volatility skew ? That would be interesting information.
Founder SKXYWTF - Global Wealth Fund I World Trade Factory | What in the World! | Jack of All Trades | Trade Secrets | AI Wealth Accelerator
4 个月These are in itself separate markets now - Bonds, Stocks, Crypto. You will have to gauge them separately with their respective confines using the SWOT framework. Trying to tie things across the three will be purely Academic work and may not work from an Investment standpoint as we have perfected the short term focus and losing sight on the long term.
North American Credit Manager / Senior Analyst at Marubeni America Corporation
4 个月the market doesn’t. I see them everywhere.