October 4, 2018 / 11:31 PM / 8 months ago

U.S. bond market volatility spikes with surging yields

Oct 4 (Reuters) - The U.S. Treasuries market’s two-day selloff pushed its volatility to its highest level since June as investors shed their bond holdings on surprisingly strong economic data and signals the Federal Reserve would raise interest rates further.

The increase in market volatility may portend another leg-up in yields which reached multi-year peaks on Thursday, as it raised the premiums on fixed income options and derivatives, making hedging more expensive for bond managers and traders, analysts said.

The benchmark 10-year Treasury yield touched 3.232 percent, which was the highest level since May 2011.

Bank of America Merrill Lynch’s MOVE indexes, which track traders’ expectations of swings in the $15 trillion Treasuries market, recorded their biggest two-day increases since late May.

Its one-month MOVE index, which gauges expected market volatility one month out, rose to 55.07 on Thursday, which was the highest reading since June 12.

Its three-month MOVE measure climbed to 56.93, which was also the highest since June 12. (Reporting by Richard Leong; Editing by Cynthia Osterman)

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