The largest financial market in the world is the US Bond Market, if this market breaks, it is truly the end of this world. The health of the US bond market matters.

The health of the world's largest market is measured by the MOVE Index.

The MOVE index is defined here:

The MOVE Index measures U.S. interest rate volatility. The index tracks the movement in U.S. Treasury yield volatility implied by the current prices of 1-month OTC options. Created in 1988, MOVE stands for 'Merrill Lynch Option Volatility Estimate' The MOVE index tracks the movement in U.S. Treasury yield volatility.

The thousands of hours of useless analysis on financial TV and YouTube mean nothing when the MOVE index is showing stress. 

Bill Clinton's chief strategist James Carville famously said: "I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a . 400 baseball hitter. But now I would want to come back as the bond market.

The MOVE index (red line below) is showing stress when it is above 120, more so if it is above 140, and the market is just broken if it is above 150.

Bond market stress is normally the result of not enough demand for US debt relative to the supply of the debt at the yield on offer (interest rate).

One way to improve demand for US debt is to make it cheaper to buy, and a method to do that is to lower the US dollar. A lower US dollar allows non-US investors to buy US debt cheaper.

Another way to reduce stress is to have less supply debt, that is, cut spending, or increase tax revenue, as this results in less US debt creation in the years ahead.

Another way to reduce stress is to ensure the debt maturity is 5 to 10 years, rather than today, when 80% of US debt is under 3 years.

The chart below shows how the US dollar has been used to release MOVE index stress. Currently, one should assume a lower US dollar is near once the hot inflation narrative story expires to cool bond market stress.

(Click on image to enlarge)

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