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Chart: Bond Market Volatility

Following on from yesterday's post on Cross Asset Volatility, the chart of today is a focus on bond volatility. Specifically what we've got here is a look at the rolling annual sum of daily changes in the US 10 year treasury bond yield which exceeded varying hurdles (the smallest hurdle being 5 basis points). What the chart shows is a collapse in bond volatility. What's interesting about this is that the smallest hurdle indicator is starting to turn up, and typically when these types of indicators turn up from such low levels it can mark a major turning point. The issue is that a rise in volatility can come in a falling yield environment as well as a rising yield environment.

Bond market realized volatility indicators

BONUS CHART: To illustrate that point, we also show bond market implied volatility in the bonus chart for today. As you can see here we've got examples where a turn up in volatility came with both a spike e.g. 2013, and plunge e.g. 2015 in bond yields. The current outlook for yields is quite nuanced as shorter term the risk of a drop in yields is elevated given sentiment and positioning, while further out we continue to expect higher yields based on our indicators of valuation, longer term macroeconomic trends, and central bank policy.

US treasuries implied volatility index chart

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9 Comments


世民166 李
世民166 李
5 days ago

Yeah, that bond volatility drop is wild. But keep an eye on those small hurdles; they usually signal some big shifts ahead. By the way, if you're into scripting, there’s this neat collection of tools you might wanna check out—could be useful, you know? Steal a Brainrot Script

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5 days ago

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So, bond volatility is looking shaky, huh? Could be a game changer, especially if that small hurdle indicator keeps rising. Nice to have resources like this to sort through the numbers better, you know? JPG to Excel

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Interesting article! I'm wondering how these predictions have held up since 2018 considering all the changes in the global economy. Hope there's an update for wacky flip soon

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