The Kobeissi Letter indicates that the MOVE index, which measures implied volatility of U.S. Treasuries, surged significantly last week, marking one of the largest weekly increases since the tariff shock on "Liberation Day" in April 2025. It describes the volatility in the Treasury market as nearing crisis levels, being the third largest weekly increase since the bear market of 2022.

Independent market records show that the ICE BofA MOVE tracks implied volatility of 2-year, 5-year, 10-year, and 30-year Treasury options. Bloomberg and Reuters recorded the weekly increase at around 30%, the largest since April 2025; intraday trading platforms noted a five-day increase of about 26%. The index level returned to around the time of heightened Middle Eastern conflict in March 2026.

The 10-year U.S. Treasury yield rose during the week, closing around 5.17% to 5.18%, with an intraday high of about 5.23%, the highest range since June 2007. The 30-year yield crossed 5.50% intraday for the first time since June 2004, closing in the range of 5.49% to 5.50%. The 5-year yield also returned above 5%.

Multiple triggering factors converged: S&P Global's September composite PMI jumped from about 55.3 to 58.4, marking the fastest expansion in over five years, with manufacturing and services exceeding expectations; the Atlanta Fed tracked third-quarter growth at about 5.1% annualized. The Fed had just raised rates by 25 basis points to 3.75%–4.00% in September, with officials signaling further possible hikes, pushing market expectations for another 25 basis points increase in October to around 70% at one point.

Energy and auction pressures compounded. Brent crude briefly returned to around $100 per barrel amid fluctuating expectations of a ceasefire in the Middle East; demand for the five-year Treasury auction was notably weak, the lowest since late 2018. Institutions like Bessemer attributed the nearly 100 basis points rise in the 10-year yield this round primarily to real interest rates rather than upward revisions in inflation expectations, with real rates cited at about 2.82%, the highest since 2008.

For comparison, during the week of March 17, 2023, following the collapse of three regional banks, the MOVE index rose about 29% in a week. This round of stock volatility has not amplified year-on-year, with the VIX remaining low, and volatility concentrated in the interest rate curve rather than equity risk premiums. On Friday, falling oil prices caused the 10-year yield to retreat from its intraday high.

In market mechanics, assets sensitive to duration and interest rates are being sold, while cash, floating rates, and configurations that can write a 5% risk-free return into discount rates are being bought. Funds are flowing out of Treasury longs, mortgage-backed securities, and growth stock valuation models into money market funds and newly issued Treasuries; beneficiaries include net shorts or the Treasury on newly issued debt, while leveraged bond funds, private equity valuations, and mortgage borrowers are under pressure. The event-driven factors stem from growth data and interest rate hike expectations, rather than a single bank run.

Source: Public Information