What is the MOVE Index?

The MOVE Index (Merrill Lynch Option Volatility Estimate) is a measure of expected volatility in the US Treasury market, calculated from options prices on Treasury futures across 2-year, 5-year, 10-year, and 30-year maturities. It functions as the bond market's equivalent of the VIX, providing a real-time gauge of interest rate uncertainty and fixed-income market stress.

The MOVE Index is expressed in basis points and represents the expected annualized move in Treasury yields. A reading of 100 means the options market is pricing in expected yield moves of about 100 basis points over the coming month (annualized). Higher readings indicate greater uncertainty about the path of interest rates, while lower readings signal calm, predictable rate environments.

During normal market conditions, the MOVE Index typically ranges between 60 and 90 basis points. During periods of elevated uncertainty, such as aggressive Fed tightening cycles, banking crises, or fiscal policy disruptions, the MOVE can spike well above 100. It reached approximately 160 during the March 2023 banking crisis and was elevated throughout 2022-2023 due to the extreme pace of Fed rate hikes.

The MOVE Index has important cross-asset implications. Elevated bond volatility tends to spill over into credit markets (wider spreads), equity markets (higher risk premia), and currency markets (increased hedging demand). Banks and dealers reduce risk-taking and market-making activity when bond volatility is high, which can reduce market liquidity and amplify price moves in a self-reinforcing cycle.

For portfolio managers, the MOVE Index helps calibrate fixed-income risk. When the MOVE is low, duration exposure is relatively safe and carry strategies are attractive. When the MOVE is high, reducing duration exposure, increasing hedging, and widening stop-loss levels may be prudent. The ratio of the MOVE to the VIX also provides insight into the relative pricing of bond versus equity risk, which can inform cross-asset allocation decisions.