Wall Street titans from Jamie Dimon to Jeff Gundlach are warning about a spike in volatility — and the worst bond-market auction in 10 years just raised the threat level

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Jamie Dimon and Jeff Gundlach are among those sounding the alarm on a spike in interest rates that would rough up the stock market.

Consider the one-month Merrill Lynch MOVE index, a measure of expected volatility in bonds, which plunged to its second-lowest level ever in February. Also, the CBOE's Volatility Index for stocks fell to a six-month low before trade tensions flared up earlier this week.

On Wednesday, investors received a wake-up call to the reality that demand for Treasurys could dwindle enough to send yields flying. At the monthly auction for 10-year notes, bids exceeded the offering by 2.17 times, the weakest amount since 2009, according to Bloomberg data. "People tend to forecast a little bit of a change, and sometimes it's a huge inflection point which people almost never capture," Dimon said on, who is nicknamed Wall Street's bond king, this cautionary tale on higher yields extends to the stock market. And the common thread is the low volatility that has ensued in both markets.

Against this backdrop, the Treasury market faces an unpredictable future that could swing interest rates sharply in either direction, he said. Yields could fall back towards zero if the Federal Reserve remains accommodative enough, but they could spike if demand for bonds continues shrinking.He continued:"I could argue for a 6% 10-year in 2021, which I talked about in 2016 when the 10-year was at 1.32%. I could also argue for the 0% 10-year because of the [Fed] manipulation.

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