The real thing to watch in the U.S. debt market is no longer the 10-year yield.

Why Has the AI MOVE Index Become a New Focus in the U.S. Bond Market?

Recently, the market’s main theme has become very concentrated.

The situation in the Middle East has escalated, crude oil prices have risen rapidly, inflation expectations have resurfaced, and market judgments on the Federal Reserve’s policy path for the year have tightened accordingly. In March, Brent crude oil prices surged astonishingly within the month, and investors’ expectations for rate cuts have clearly retreated, with short-term U.S. Treasury re-pricing pressures continuing to rise.

Although economists expect two rate cuts by 2026, market reactions vary greatly. A Bloomberg survey of economists on March 13 mentioned that respondents expect two rate cuts of 25 basis points each in 2026. However, futures market pricing is slightly tighter than economists’ expectations: the market has not completely abandoned the rate cut expectations for 2026 but is currently only willing to incorporate a little more than half a cut.

This indicates that, against the backdrop of high oil prices, inflation, and policy uncertainty, investors remain quite cautious about the Fed turning to easing.

Source: Bloomberg

Many are still watching the 10-year Treasury yield for direction. Although it is one of the most important risk-free rate benchmarks globally, influencing stock valuations, dollar asset prices, and global financing costs, focusing solely on this makes it difficult to truly explain what is happening in the bond market right now.

Because the 10-year yield more reflects the final price outcome rather than the process of price formation. So, it’s hard to tell whether this is normal repricing or if the market’s confidence in the future is waning, with trading and underwriting capacity weakening.

What’s more worth watching now are two earlier signals that exposed pressure: one is the MOVE index, and the other is the recent U.S. Treasury auction results.

First, let’s talk about the MOVE index. It reflects the market’s expectations of future interest rate volatility.

This index is essentially derived from U.S. Treasury options prices, using option pricing formulas to back out implied volatility, then weighted and combined across key maturities of 2, 5, 10, and 30 years. It measures the market’s anticipation of how much interest rates will fluctuate in the future.

Currently, the MOVE index has risen to near high levels over the past three months. This indicates that current international issues have intensified market pricing disagreements and expectations instability. In other words, the market lacks a stable judgment on how future policy paths, inflation persistence, and geopolitical risks will transmit.

Chart: MOVE Index Trend Over the Past 3 Months Source: Bloomberg

For the bond market, this state of uncertainty naturally raises pricing costs.

Because when the market lacks consensus on future interest rate paths, buyers and sellers quickly diverge in their judgments of fair value, market makers demand higher risk premiums, and trading becomes more expensive.

The importance of the MOVE index lies in its closer reflection of the market’s actual condition compared to the 10-year yield.

The yield level tells us where prices are, but the MOVE index indicates whether the market still has confidence in the future. Sometimes, rising yields are just normal re-evaluations of growth, inflation, or supply pressures; but if implied interest rate volatility also rises in tandem, the situation becomes much more complex. It signals that market disagreement is widening, and traders, asset managers, and macro investors are increasingly diverging in their outlooks, making bond pricing more difficult. For assets like U.S. Treasuries, which serve as global benchmarks, such changes are inherently worth vigilance.

Looking further, this pressure is no longer just at the expectation level but is also beginning to manifest in the primary market, namely in Treasury auctions.

Treasury auctions can be understood as: when the Treasury Department issues bonds, whether the market is willing to buy and at what price.

Market caution is now quite specific: looking at the most telling metric, the tail, which this time is 0.88 basis points, compared to near zero in the last auction. The bid-to-cover ratio is only 2.43 this time, lower than last month’s 2.50 and below the average of about 2.54 over the past ten auctions. The indirect bid ratio is 62.6%, still decent but slightly lower than last month’s approximately 63.6%.

Source: Bloomberg

All these flashy numbers indicate that the market isn’t abandoning U.S. Treasuries altogether but is buying more cautiously and being more selective about prices. To sell bonds smoothly, the Treasury needs to offer slightly higher yields; the lower bid-to-cover ratio suggests some willingness to buy, but not as actively; and the decline in indirect bids indicates that the more stable part of the demand is slowing down.

In plain terms, investors aren’t refusing to buy but are waiting for prices to become more attractive before stepping in.

Looking at the MOVE index and auction results together, the signals from the current U.S. Treasury market are quite consistent.

One signal comes from expectations: market confidence in future interest rate paths has declined, and pricing disagreements have widened; another comes from financing: after new Treasury supply, market participation has become more cautious. Both signals point to the same issue: the U.S. bond market’s capacity to absorb shocks is no longer as resilient as before. Therefore, focusing solely on the 10-year yield direction is no longer sufficient. What truly matters is understanding how market structure behind prices is changing.

Of course, there’s no need to directly extrapolate this to systemic failure. The repurchase market remains stable, and the critical financing hubs have not experienced widespread failures. This indicates that the market’s early warning signals are present, and it has entered a more fragile state, but full-blown breakdown is still some distance away.

Many risks accumulate this way: the earliest signs of deterioration are often not in prices themselves but in volatility, bid-ask spreads, auction quality, and market maker risk appetite.

From this perspective, the three most important things to monitor next are:

First, whether the MOVE index will continue to rise;

Second, whether the bid-ask spreads on the short end will further widen;

Third, whether subsequent Treasury auctions can restore stable demand.

These three variables are more capable than simply watching the 10-year yield to answer a key question: Is the current U.S. bond market experiencing a controllable re-pricing, or is its capacity to absorb shocks declining and risk amplification increasing?

What we should be truly wary of now is whether the U.S. bond market can still maintain its previous characteristics of low friction, high capacity, and strong absorption when facing continuous shocks. Once this begins to loosen, the transmission speed and adjustment magnitude across various assets could amplify.

I believe the most reasonable action for investors now is to proactively reduce their exposure to interest rate risks in their portfolios, moving the portion of their assets they consider stable into assets with truly low volatility and high liquidity.

To put it more plainly:

If you need your money within the next one or two years, don’t keep it in medium- to long-term bond funds, don’t rely on products that depend on rate cuts for yield, and don’t assume that U.S. Treasuries, long bonds, or fixed income are inherently stable. In today’s environment, many think they hold safe assets, but in reality, they are holding assets highly sensitive to interest rate fluctuations.

Further, this can be broken down into three steps:

First, for expenses you are certain to incur within the next 24 months, completely divest from high-duration (high interest rate sensitivity) bonds and high-volatility equities.

The goal of this portion of your assets is simple: ensure they remain intact when needed, with manageable volatility.

This goal takes precedence over yield. Whether you’re paying tuition, making a down payment, saving for entrepreneurship, or setting aside family reserves, these should not be exposed to long-duration interest rate risk.

Second, if your portfolio is heavily weighted in long bonds and high-valuation growth stocks, now is the time to reduce one or both, preferably both.

Because in the current environment, these two asset classes tend to suffer together: rising interest rate expectations first pressure bonds, then drag down high-valuation equities. Thinking you’ve diversified is a trap—you’re actually exposing yourself to the same risk twice. This pitfall is common now and easy to overlook.

Third, don’t chase oil and gold.

Oil prices have already surged significantly, and gold’s recent performance shows that volatility across assets has exceeded expectations. The biggest mistake ordinary investors make in such times is to react impulsively to volatility—shifting from long-term bonds to gold or crude oil. Such switches are very likely to buy at high points.

The most troublesome aspect of this pressure isn’t the decline in U.S. Treasuries but the fact that the anchor responsible for global asset pricing itself is becoming unstable. Once even the U.S. bond market responds to shocks with higher volatility, higher prices demanded, and more cautious auctions, it’s time to consider whether the entire market’s sense of security still holds.

When oil prices, inflation, and policy uncertainty all rise simultaneously, the U.S. bond market is no longer just passively reflecting macro changes; it begins to generate, amplify, and transmit pressure itself. At this point, clinging to the idea that rate cuts are inevitable, long bonds will eventually recover, and fixed income is safe, is no different from chasing high prices and selling low.

Investing has never been about superstition toward certain assets but about constantly adjusting your understanding of the environment. Today, what truly needs correction is the habit of mistaking interest rate-sensitive assets for stable assets.

★ Disclaimer: The above reflects only the author’s personal views and is for informational, educational, and exchange purposes only.