US Treasury Futures Negative Convexity Rises to Near-20-Year High; MOVE Index Founder Warns of 'Nightmare Scenario'

Harley Bassman, founder of the US Treasury market's MOVE Index, warns that an underappreciated feature of the bond market could intensify selling pressure and further drive up yields. In a post, Bassman noted that this risk stems from how traders deliver bonds at futures contract settlement. He stated that negative convexity associated with bond futures—representing their pronounced downside risk—has reached its highest level since 2007, suggesting it may have amplified the recent round of selling in the bond market.