The best way to demonstrate this is with the MOVE index. The \u201cMerrill Lynch Option Volatility Estimate<\/a>\u201d tracks the expected near-term volatility of US Treasury bonds, as implied by option prices, and is the bond market sister of the US stock market\u2019s more famous VIX index. <\/p>\n The MOVE index hit 76.77 yesterday, its lowest reading since the beginning of 2022, and roughly half the level it hit at the peak of the post-Liquidation day market mayhem<\/a> in April.<\/p>\n Sure, it remains far above the lows seen after Covid-19, when interest rates were pinned near zero and the Fed was hosing the Treasury market with money, or the pre-pandemic lows. But it\u2019s still a pretty noteworthy decline, given the cross-currents that the bond market still faces. <\/p>\n While the stock market is being dragged higher by the AI hype, the US government debt market is facing the ebb and flow of stubborn inflationary pressures<\/a>, probable but uncertain<\/a> rate cuts, massive issuance<\/a>, unpredictable central bank leadership<\/a>, and wary foreign investors<\/a>. <\/p>\n And yet:<\/p>\n Financial journalists get excited about low readings for volatility gauges like MOVE and VIX. \u201cIt\u2019s quiet out there \u2014 TOO quiet\u201d is the clich\u00e9 that often gets trotted out. The reality is that these volatility gauges are terrible indicators and say next to nothing about the immediate outlook.<\/p>\n But the recent decline of rates vol feels a little complacent, and mystifying. What is behind it? Well, it depends a little on who you ask.<\/p>\n Barclays\u2019 rates derivatives analysts say that it mostly reflects the fact that the Trump administration\u2019s \u201cOne Big Beautiful Bill\u201d has now been passed, giving investors at least some clarity on the fiscal outlook\u2009.\u2009.\u2009. <\/p>\n We think that over the past year realized volatility, as well as short expiry volatility, may have been kept elevated by concerns around Treasury supply and fiscal sustainability contributing to rate moves. But with the OBBB having passed, and tariff revenues acting as a significant offset to the fiscal expansion in the bill, these concerns have also faded. That is the most likely reason for the current low volatility.<\/p>\n<\/blockquote>\n .\u2009.\u2009. and the fact that analysts are in unusual agreement on the near-term economic outlook: <\/p>\n The low realized volatility is also supported by the fact that there is not a whole lot of disagreement in the market about key variables like inflation, Fed policy or 10y yield forecasts. In fact, our forecast dispersion-based models of realized volatility suggest that the fundamental backdrop for uncertainty (as measured by Q3 2025 1y ahead forecast dispersions for factors like 10y yields, inflation, policy rates) is currently not that different from pre-pandemic levels.<\/p>\n<\/blockquote>\n Then there are potential technical factors, such as systematic vol sellers \u2014 investors that generate income by selling insurance against sharp moves \u2014 having an impact on both implied and realised Treasury volatility. <\/p>\n Rick Rieder, chief investment officer for global fixed income at BlackRock \u2014 and now apparently a candidate<\/a> for the Fed chairmanship \u2014 offered up another interesting rationale in MainFT<\/a> last month. He argued that calm reigns because \u201cthe US has quietly become one of the world\u2019s most shock\u2011resistant economies\u201d. <\/p>\n That resilience not only supports equities, it also lets investors lock in once\u2011in\u2011a\u2011generation income on high\u2011grade bonds that serve as a ballast alongside riskier positions.<\/p>\n Markets are not ignoring risk; they are pricing a system built to absorb it. A service\u2011oriented economy, fortress balance sheets, and a liquidity\u2011rich investor base deliver a two\u2011for\u2011one: resilient growth and elevated fixed income yields.<\/p>\n<\/blockquote>\n![\"Line](\"https:\/\/www.europesays.com\/us\/wp-content\/uploads\/2025\/08\/https:\/\/d6c748xw2pzm8.cloudfront.net\/prod\/964fa230-79b8-11f0-b84f-e9280565d700-standard.png\")
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