A measure of US bond-market volatility is heading for its biggest annual decline since the wake of the financial crisis with the Federal Reserve’s interest-rate cuts dampening risks of an economic downturn.
The ICE BofA MOVE Index, a gauge of expected bond-market volatility, fell to about 59 Friday, the lowest level since October 2021. The index has fallen from around 99 at the end of 2024 and is on course for one of the steepest annual declines since data began in 1988, surpassed only by the 2009 slump.
Since spiking in April when President Donald Trump’s global tariffs roiled markets, volatility has been trending lower across bonds, currencies and stocks. A series of benign economic data — including the strongest third-quarter gross domestic product growth figures in two years – along with steps by the central bank to safeguard the labor market have helped to reduce uncertainties in financial markets.
“We haven’t really had any problematic data” that could trigger violent market moves, said John Briggs, head of U.S. rates strategy at Natixis Corporate and Investment Banking, noting that volatility tends to be “very low” at this time of the year.
The Fed has lowered interest rates for three consecutive meetings since September as the labor market cooled. Bond traders are pricing in another two quarter-point rate cuts for 2026, with the first move expected by the June meeting.
What Bloomberg strategists say…
“The Federal Reserve’s easing trajectory is now well telegraphed, even if the timing remains contested. Wall Street consensus continues to center on lower policy rates in 2026 and a modestly steeper yield curve, a configuration that can coexist with subdued volatility even as debates persist around inflation persistence, growth durability and fiscal risks.”
— Brendan Fagan, Macro Strategist, Markets Live. For the full analysis, click here.
The absence of market-moving data during a week bookended by the Christmas and New Year holidays has also contributed to less trading activity and a tamer market in recent days.
Briggs expects volatility to stay low until the new year starts.
“January can sometimes bring surprises, or challenge widely held consensus views,” said Briggs.
Written by: Ye Xie — With assistance from Elizabeth Stanton @Bloomberg
The post “Treasuries Volatility Set for Biggest Annual Drop Since 2009” first appeared on Bloomberg
