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Treasury Market Continues to Lead as Yields Move Higher

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Rates as of 0500 GMT

Market Recap

The volatile Treasury market continues to set the pace for other markets. You can see just how volatile it is from the graph, which shows the recent surge in the MOVE index. The MOVE index is like the betterknown VIX index of stock market volatility but for bonds; it tracks the movement in US Treasury yield volatility implied by current prices of options on Treasury bonds.

By comparison, volatility in the stock market is about normal for the period under examination and for the FX market its a bit below normal.

The zscore is a way of normalizing data to make it comparable across different measures we take the average and the standard deviation and find out how many standard deviations it is away from the average at any given time.

Yields in most of the major bond markets were higher yesterday, led by Britain after Chancellor Sunak announced an expansionary budget.

Sunak came through with what the FT described as a spend now, tax later Budget to kickstart UK economy. Over the next two years he will spend GBP 65bn more than estimated back in November in supporting jobs, investment, and the recovery, for example by extending job furlough schemes and tax breaks until the end of September instead of allowing them to end in the next few months as scheduled. But that will be followed by GBP 25bn a year of corporate tax and income tax rises by the middle of the decade, including the first rise in corporate taxes since 1974.

The increase…

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