shine trader live reports:
The MOVE index, which tracks the implied volatility of U.S. Treasury bonds, is soaring, which shows that investors are increasingly worried about the near-term risks brought about by the Fed meeting statement, especially Powell’s plan to reduce the scale of bond purchases.
(The MOVE index is a yield curve weighted index of the standardized implied volatility of 1-month Treasury bond options. It contains the weighted average of the current 2-year, 5-year, 10-year, and 30-year bond volatility.)
Brokers said that the index soared to the highest level since April 2020, indicating that some insider trading is taking place in U.S. Treasury bonds, but this may also be related to the serious misalignment and low liquidity shown on the right side of the curve.
Foreign media pointed out that the impact of the sharp depreciation of the 20-year U.S. Treasury bonds last week had “aftershocks”, which forced relative value funds and hedge funds to liquidate their treasury bonds.
It can be seen that the 5s30s (the difference between the yields of 5-year and 30-year US Treasury bonds) curve has begun to collapse.
In the past two years, the price discovery mechanism of the global government bond market (the formation of prices that can predict the future spot market and its monopoly trend through open auctions) has failed. In an environment affected by the epidemic, a free market is almost non-existent.
In terms of macro interest rate bets, investors have suffered “heavy casualties” this week, and the entire hedge fund industry has suffered huge losses . When a big whale is caught, the small fish nearby are not immune. The risk is far greater than it seems.
In terms of US interest rates, the yield curve of the 20-year and 30-year Treasury bonds has reversed. At the same time, there has been no real economic growth, which means that real demand has been destroyed. Inflation caused the Fed’s interest rate to increase by 200 basis points.
However, the VIX index, which reflects the expected volatility of the Standard & Poor’s 500 Index, remains at a low level of around 16, indicating that the volatility of the bond market has not scared stock investors. We must know that in April 2020, when the MOVE index is close to the current level, the VIX index is already close to 50. However, it is interesting that compared to VIX, the MOVE index has returned to the level before the epidemic.
Reprint indicated source：Spark Global Limited information