By outdoor-nature-child.com After the U.S. elections, various maturities of U.S. Treasury yields are expected to experience significant fluctuations, potentially reaching as high as 18 basis points. Harley Bassman, who created the MOVE index in 1994 to measure the implied volatility of the U.S. Treasury market, suggests that the bond market will be shaken post-election. He noted that the options prices indicate an unprecedented volatility in U.S. Treasury yields across various maturities. In the remaining days of the one-month rolling period, the expected daily fluctuation is around 6 basis points.
Such volatility has been seen in recent years, particularly during the Federal Reserve’s rate hikes in 2022 and 2023. However, Bassman, who has 40 years of experience in the bond market and is now a managing partner at Simplify Asset Management, asserts that this volatility is atypical and marks one of the few “big days” in his career.
With less than three weeks until the November 5th election, Donald Trump and Kamala Harris remain in a tight race. Trump’s unexpected victory over Hillary Clinton in November 2016 led to a 37 basis point fluctuation in the 10-year U.S. Treasury yield, marking the largest single-day movement in over a decade.
The MOVE index is calculated based on the implied volatility of one-month U.S. Treasury options. As the voting day approaches and the index enters its 30-day window, the MOVE surged from 100 to 124 on October 7, marking the largest single-day increase since 2020. It climbed to 127 on October 15, the highest level since December of the previous year. In comparison, during the weeks leading up to the elections in 2016 and 2020, the index hovered around 60.
Bassman recalled the last time he witnessed a similar “known unknown event” was in January 1991, as the United Nations set a deadline for Iraq to withdraw from Kuwait. He explained that the uncertainty surrounding such events prompts investors to seek protection, which drives up the expected volatility indicators.