FX Vol Still Attractive

Feb 20, 2020 | Other

Since news of coronavirus first spread, markets have struck a decisively risk-off tone with higher yielding currencies selling-off. Commodity currencies and Asian markets have been particularly hard hit. Despite the fresh bout of FX weakness, implied vol has been...

Hedge Tail Risks on Low FX Vol

Jan 29, 2020 | Global Economy

Implied volatility across asset classes has receded in recent months as the barrage of global systemic risks (US-China trade war, disorderly Brexit and the manufacturing slowdown) has dissipated. Even though FX vol, along with other asset volatilities, remained...

Complacency sees Vol Sellers Return in Numbers

Apr 12, 2019 | US Equities

Short volatility positions are back at extreme levels once again, showing the growth of complacency among market participants. The more dovish than expected Fed has allowed volatility sellers to become more emboldened, and speculative VIX future positions are back up...

The Yield Curve and Volatility

Oct 14, 2017 | US Economy

Falling liquidity was one of the principal reasons behind our call for a flatter US yield curve this year. Excess liquidity often drops towards the end of an expansion. At the same time the relative demand for credit falls, while the central bank is reacting to...

Credit Spreads and Equity Volatility to Rise

Nov 12, 2016 | US Economy

(from our Tactical report of 1st November 2016) Equity volatility and credit spreads are almost perfectly correlated. In part this is because equity is a perpetual option on the solvency of a firm. When credit becomes stressed, equity volatility jumps as well. You can...

Higher Volatility and Credit Spreads Ahead

Oct 14, 2015 | Leading Indicators, US Economy

All of our leading indicators for credit spreads and volatility point to wider volatility and higher credit spreads over the next two years.  The credit cycle is long in the tooth, and the best predictor of future credit spreads is the lagged growth in lending. For a...

Crash and Volatility Warning

Jun 24, 2013 | Featured, Tactical

We have been warning clients in the past few months that volatility was set to rise towards the middle of the year. We have been flagging the almost parabolic increase in margin debt as well as our leading indicator for equity volatility. This excerpt is from our...

Anti-QE in Japan

May 28, 2013 | Japan

Last week’s BoJ meeting did not meet expectations of trying to soothe the Japanese bond market.  Yields have shot up, with 10y yields 50% higher in May as of this morning, largely a consequence of the BoJ succeeding in raising inflation expectations.  However, of more...

Where Japan Rate Vol Leads, Others Follow

May 17, 2013 | Japan

Volatility in general is still falling, with both equity and commodity volatility lower than their 2005/06 trough.  However, we are seeing signs of life in interest rate volatility.  US rate volatility has recently pipped up, and this has been led by a sharp increase...