WATCH THE MOVE

 
There is something called the MOVE index.

Simply put, it's the bond equivalent to what the VIX is for equities, a gauge of volatility. Since volatility for many represents fear, both the MOVE and the VIX are fear indices. Fear moves markets. And fear moves equity and bond prices.

If you think not check out last week's turmoil in high yield bonds after Third Avenue sprung it situation on investors and shut down redemption privileges so it could liquidate their fund in an orderly way. It's their definition of orderly not your or mine.

Last week's long awaited Fed action--will they or won't they hike prices on money and, if so, how often and how steeply--was about uncertainty. And uncertainty is a pseudonym for fear. Last week ahead of the Fed's announcement, the MOVE hit 79.57, a two month high, according to the WSJ.

Part of Yellen's message was about confidence, the job market signaled to her and her fellow bankers at the Fed, the economy was stable enough to hike rates 25 basis points with projections for as many as four rate hikes separated by reasonable intervals in 2016. Again, keep in mind, it's their definition of reasonable not your or mine.

When interest rates rise, bond prices go down. What also goes up but few are discussing is government debt services. A five year bond has a five year fixed rate of servivce. Governments finance much of their spending by floating debt. So the MOVE is also an important gauge about fluctuations in the money market.

When a corporation or government sells bonds it's borrowing money, not much different from you or I borrowing money to buy a car or house. There's a term, interest rate and payments. The same holds true for banks,savings and loans, if any of those are still around, and credit unions when they float CDs.

A week later the MOVE traded at 66.37. So what's the message? Mostly likely that traders or investors given the global economic outlook, a rather gloomy one outside the U.S., doesn't think Yellen's plan will see full fruition.  And that's a proxy for what and how they think the economy will do.