MOVE Index drops to 2026 lows as Fed holds steady and inflation cools

The bond market’s fear gauge just went quiet. The ICE BofA MOVE Index, which tracks implied volatility in US Treasury options, slid to readings in the low 60s recently, marking the lowest levels of 2026. On August 14, the index closed at 69.58, still well below the spikes that have periodically rattled fixed-income markets over the past few years. Two forces are pulling Treasury volatility lower in tandem. The first is inflation data that keeps coming in softer than feared. US Consumer Price Index data for July 2026 showed year-over-year inflation at 3.4%, a modest step down from 3.5% in June. That’s not the kind of dramatic improvement that gets champagne uncorked at the Fed, but it extends a trend of gradual cooling that markets have been pricing in with increasing confidence. The second force is the Fed itself. At its July 29 meeting, the central bank held the federal funds rate between 3.50% and 3.75%. No surprise there. But the vote was revealing: a 9-3 split, with three dissenters signaling that the internal debate about inflation’s trajectory is far from settled. Think of the MOVE Index as the VIX’s bond market cousin. Where the VIX measures expected stock market volatility,...