The broad-based measure of Treasury bond volatility - MOVE - has broken higher, and, as BofAML's MacNeil Curry notes, confirms a base and change in trend (to higher or more volatility). With the month of December traditionally a strong month for the MOVE Index and Treasury volatility in general, Curry warns there are two ways the volatility can move higher - either higher rates or lower equities.
We look for Treasury volatility to head higher to 81/87 and potentially beyond
THERE ARE 2 WAYS THE MOVE CAN HEAD HIGHER: Higher rates OR lower equities.
We expect 10yr yields to run to the Sep highs at 3.00% and eventually beyond. However, we are very focused on 5yr yields, specifically the 1.451%/1.473% zone as KEY. Through here completes a 2m Head and Shoulders Base, 1.670%/1.659% and potentially beyond.
The other way the MOVE/Treasury volatility can rise is from a DECLINE IN equities. Yesterday's price action in the S&P500 was a concern, resulting in cash a break of month long wedge support (1807) and ESZ3 breaking the 1799.75/1799.00 pivot.
However, for damage to transpire to the larger uptrend, we need to see a minimum of a close below the 21d in cash at 1786. Back above 1799.75 in ESZ3 is needed to indicate stabilization and a resumption higher.