In the last few weeks volatility has returned to financial headlines with a vengeance leaving traders checking under their beds for asset bubbles and causing “panic” when VIX traded with a 17-handle for the first time since November 2016. So what’s really playing out in markets?
* note that the volatilities shown are calculated using industry standards based on the type of asset; for example, absolute levels cannot be compared between rates and metals.
In rates space historical volatility (orange) has picked up but implieds (blue) are lackadaisical. FV/5-yr, TY/10-yr, and US/bond, 30-day constant maturity series are shown respectively below:
Here’s a longer dated TY history:
Gold vol has actually found a bid (with silver and palladium following suit):
While platinum, thus far, is flat:
Natural Gas implied volatility is the lowest it’s been since 2014:
Although oil is off the lows of the year:
Vol has come back down in grains after an exciting month although wheat could be picking up again:
And last but not least, E-mini S&P500 vol has caught a bid:
For a little perspective of where we are currently, here’s a 5-year history of a few constant maturity series:
Like all things, low vol environments eventually come to an end, but low vol by itself doesn’t “trigger” eruptions. Claiming that vol can uptick ahead of an event isn’t exactly going out on a limb. But I’m sure they’ll tell you they told you so next week.