Intercontinental Exchange, an operator of global exchanges and clearing houses and provider of data and listings services, is to acquire a family of fixed income volatility indices, including the prominent Merrill Lynch Option Volatility Estimate (MOV”) family of indices, from Bank of America Merrill Lynch.
“The MOVE Index has a long history of providing strong signals about bond market sentiment, and we’re excited to have it become part of our portfolio of fixed income indices,” says Lynn Martin, President & COO of ICE Data Services. “MOVE’s unique ability to concisely measure that sentiment will allow us to play a critical role in continuing to help our customers manage risk.”
The MOVE Index is a well-recognised measure of US interest rate volatility that tracks the movement in US Treasury yield volatility implied by current prices of one-month over-the-counter options on two-year, five-year, 10-year and 30-year Treasuries. In addition, ICE will also acquire other variations of MOVE that track different option expiries, as well as other indices that similarly measure volatility in the US interest rate swap market.
“One can think of the MOVE as ‘the VIX for Bonds,” says Harley Bassman, who created the MOVE index in the 1990s. “By its design, MOVE has the unique ability to provide a signal for changing risk sentiment in the fixed income markets. While I would not call it predictive in isolation, rare is the case where a simultaneously low MOVE, flat Yield Curve and tight Corporate Spreads are not soon followed by bothersome market conditions.”