Bond-market volatility jumped this week as US Treasury yields climbed to their highest levels in about two decades, a swing that matters to pension sponsors who value liabilities off market rates.

ICE BofA's MOVE Index, a gauge of Treasury volatility, had surged about 29.69% this week as of Friday, Bloomberg reported. That is the biggest weekly increase since April 2025, when President Donald Trump's sweeping import tariffs roiled global markets. The index is at levels last reached in March, soon after the Iran war began. Bloomberg said even a slight rise Friday would make it the largest weekly jump since 2022.

The 10-year Treasury yield reached 5.23% on Friday, its highest since 2007, CNBC reported. Fortune said that is more than a full percentage point above where it stood just before the Iran war started. The 30-year yield hit 5.49%, the highest since 2004.

What drove the move

The Federal Reserve raised interest rates Sept. 16, its first increase since 2023, and forecast further action, Bloomberg reported.

On Sept. 23, the 10-year yield had its biggest one-day jump in nearly 18 months. CNBC cited hawkish commentary from a senior Fed official, weak demand at a five-year note auction, high oil prices and much stronger-than-expected business surveys. Bloomberg said US business activity had accelerated at its fastest pace in more than five years.

Macquarie's Thierry Wizman said heavy government and corporate bond issuance has become a bigger driver of yields this year, including borrowing tied to artificial intelligence spending, CNBC reported.

Bloomberg noted that volatility measures for stocks, currencies and oil remain within recent ranges, even though Brent crude has risen almost $15 a barrel this month amid renewed US-Iran hostilities. The disparity likely reflects a repricing of the Fed's tightening path, it said.

Traders step back

Adam Kurpiel, head of rates strategy at Societe Generale SA, said his team is neutral on US rates and waiting "for volatility to subside before initiating trades."

Swaps imply about a 70% chance of a quarter-point rate increase in October, up from virtually zero at the start of the month, Bloomberg said. Four hikes are nearly fully priced by the end of next year.

"Yesterday was capitulation day," said Benoit Gerard, rates strategist at Natixis SA, referring to Thursday's surge. "There has probably been a change of mindset since this month's rate hike and the end of denial around the prospect for more rate hikes," he said.

Bloomberg reported that bonds had steadied Friday as oil prices eased.

What it means for plans

Rising rates normally reduce the value placed on pension liabilities, Milliman has noted.

Milliman's latest index shows the 100 largest US corporate plans were 112.2% funded at Aug. 31. At July 31, when the funded ratio was 112.1%, the discount rate stood at 6.02%, up 47 basis points from a year earlier, according to Milliman's August index. Milliman projected a $144 billion surplus by the end of 2026 if that rate holds and assets meet expected returns.

Its public plan index showed a funded ratio of 88.2% at July 31, down from 88.7% in June.

Those figures predate this month's bond selloff.

Principal said in April that with funded status at a 25-year high, many sponsors are focused on preserving gains, including checking whether liability-driven investing programs match the shape of their liabilities.