With uncertainty within the FED and FOMC’s liquidity plan moving forward in regard to monetary policy, the bond market remains somewhat volatile. Volatility in bonds can be seen through standard deviation, which measures the variability of returns. This accounts for previous historical data. Measurements like the CBOE VIX (Chicago Board Options Exchange Volatility Index), which measures the volatility of the stock market in comparison to the S&P, uses its own deviation that actually calculates potential future volatility. CBOE volatility is only at 13.9, far under the 21.4 historic average, as seen here, in a comparison of it to the current difference of 10-Year to 2 Year Treasury yields. So the stock market stands at somewhat of a low in terms of volatility.

The MOVE Index, most relevant for treasury volatility, stands at 92.24, which is definitely higher than usual. Although a decline from this time last year when treasury volatility hit 182.64.

As of Monday, the yield on the benchmark 10-year U.S. Treasury note was 4.252%, up form 3.860%. Causing bond prices to drop, as bond price is inversely proportionate to its yield when sold on the secondary market.

Right now, the Fed’s short-term rate sits in a range between 5.25% and 5.5%, a 23-year high. Coming into 2024, investors expected the Fed to cut that rate six times this year, bringing it down to 3.75%—4%. 

The reality check came when inflation readings from the most recent BLS (Bureau of Labor Statistics) report indicated The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in February on a seasonally adjusted basis, after rising 0.3 percent in January. Over the last 12 months, the all items index increased 3.2 percent, up from economist’s predictions of 3.1%, before seasonal adjustment, forcing investors to dial back their rate-cut bets. Now, traders expect rates to end the year between 4.5% and 4.75%. Slightly higher than previously estimated.

The International Monetary Fund expects the American economy to expand 2.1% this year — more than twice its forecasts for growth in the major advanced economies Japan, Germany, the United Kingdom, France and Italy.