Does the MOVE Index Predict Returns?

Does the ICE BofAML MOVE Index, the implied volatility of U.S. Treasuries as derived from options on U.S. Treasuries with maturities 2, 5, 10 and 30 years, usefully predict U.S. stock market and U.S. Treasury bond returns? To investigate, we perform two sets of calculations using SPDR S&P 500 ETF (SPY) as a proxy for the U.S. stock market and iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for U.S. Treasury bonds:

1. Lead-lag analyses using correlations between end-of-month MOVE Index or change in MOVE Index and monthly SPY or TLT returns.
2. Average next-month SPY or TLT returns by ranked fifth (quintile) of end-of-month MOVE Index or change in MOVE Index.

Using end-month MOVE Index levels and monthly dividend-adjusted SPY and TLT data during November 2002 (limited by MOVE Index data) through August 2025, we find that: