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Brian Chappatta

Low Bond Volatility Creates Trove of Cheap Bets

Whatever happened to rising interest rates sparking market turbulence?

Wagering and hedging are cheap, for now.

Wagering and hedging are cheap, for now.

Photographer: Christopher Furlong/Getty Images

The Federal Reserve is raising interest rates, and that’s going to increase volatility. Or at least that was the nearly unanimous view of investors worldwide heading into 2018.

But aside from “volmageddon” in early February, that simply hasn’t been the case. Instead, the stock market’s fear index (formally the Chicago Board Options Exchange Volatility Index) is firmly below its five-year average. Interest rates are even quieter, with Bank of America Corp.’s MOVE index, which tracks price swings on U.S. Treasury options, not far from its all-time low set 10 months ago. The benchmark 10-year yield is still on track for its quietest quarter since 1965.