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Citi cautioned on Friday that equity markets face heightened danger as bond volatility surges, a trend the bank attributes to the long end of the yield curve rather than shifting Federal Reserve expectations.
The bank's analysis indicates that risky assets are currently more sensitive to the turbulence of a rates sell-off than to the absolute level of interest rates, a dynamic tracked by the MOVE index.
The MOVE index exceeded two standard deviations on a one-year basis last Thursday. This spike followed strong PMI data and a weak auction that drove the 10-year Treasury yield above 5%.
Citi noted that historically, such elevated readings in the MOVE index have aligned with declines in the S&P 500.
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