Harley Bassman on Trump, the Fed, and the Bond Market
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Why did US Treasury yields rise after Trump’s election victory?
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Hello and welcome to another episode of the Odd Lots podcast. I'm Tracy Alloway.
And I'm Joe Weisenthal.
Joe, the week's not over.
No.
Yeah, we're recording this November 6th at 1033 a.m. But one thing that is over is a lot of people expected that at this point there would be significant ambiguity about who had won the election. And actually, that part is over. There's no ambiguity at all. It's been called.
Yeah, that's right. So Trump has obviously won the election and we've seen a pretty big market reaction. Equities obviously up, but also bond yields are going up, which means prices are going down. And there's been lots of talk about the return of volatility in the bond market and the way investors or traders were sort of approaching event risk from this election. I wrote about it in the newsletter. There are other people who have been writing about it. And of course, as I said, the week isn't over yet. We still have that Fed meeting on Thursday.
No, that's right. You know, you mentioned the event risk and the stock market rally and the bond move. And I would say two things. I think there is probably... just sort of generically, probably a view among equity investors that Trump era policies, probably less regulation, lower corporate taxes is good for stocks. That seems like something. On the other hand, it's interesting because the VIX has absolutely collapsed. And so I think part of the reason perhaps for this, at least some component of this stock market reaction is probably just the end of that election certainty being gone. The unambiguous outcome and setting aside Trump versus Harris policies. Now, on the other hand, what's interesting is the move index, which, you know, like
the bond equivalent of that's
lower, but not dramatically lower. And it still remains at very high levels, at least relative to recent years or at least over the last year. So there are sort of, I would say, competing forces. Some aspects of uncertainty are gone. It's good. But then there, as you say, this sort of march up in rates, which is a global story, by the way, is still a big thing out there.
Yes. So we are going to be focusing on bonds today. We might record an equity specific episode later this week. But because of the upcoming Fed meeting and the election this week, we felt, you know, let's look at bonds. Let's look at bonds. All right. And who better to look at bonds than Harley Bassman, managing partner at Simplify Asset Management and the creator of Convexity Maven, which is an awesome publication. If you're not already reading it, Harley, thank you so much for coming back on Op Ops.
Thank you very much. Glad you're awake today.
He's also the creator of the Move Index, which I meant.
Oh,
yeah. Right.
I forgot about
that. In addition to being the convexity maven himself. Anyway, keep going,
Tracy. Well, okay. Why don't we start with the Move Index then? Harley, explain or just give us a recap on what's been going on with the Move. Because there was one specific day where we saw a big move upwards. Ha, ha, ha. In the Move.
Yeah.
The move is the VIX for bonds. It's basically a one month window.
What is the Move Index and how did it react to the election?
And so last month, when we went from October 4 to October 7, the election popped into that window.
And
so that's when you had the big jump in the move. And from that, you could then calculate the market's expectation of volatility. from that. And when we crossed over a month ago, I said 18 basis points. When we walked into yesterday, it was 17 basis points. So the market kind of got it right.
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Chapters
8 chapters
1
Why did US Treasury yields rise after Trump’s election victory?
0:01–4:06
2
What is the Move Index and how did it react to the election?
4:06–8:15
3
How does the Move Index compare to the equity VIX during market volatility?
8:15–12:08
4
What does the recent rise in the term premium mean for future rates?
12:08–16:42
5
How are Fed rate‑cut expectations influencing bond market dynamics?
16:42–21:29
6
What impact could Trump’s policy choices have on mortgage rates and the deficit?
21:29–23:56
7
How might the composition of the Trump administration affect long‑term interest‑rate outlook?
23:56–24:49
8
What are the key takeaways for investors watching the bond market now?
24:49–25:50
Speakers
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