Election Season Really Has Markets on Edge. Yes, Even Bonds
Volatility curves show investors are more nervous about the coming quarter than they have been in a very long time. That argues that risk assets are unlikely to rebound in a meaningful way until at least after the November U.S. Elections.
Consider bonds. The MOVE index of 1-month Treasuries volatility is close to record lows after a very moderate pick up since late July’s nadir. That could lead investors to conclude the Fed has bonds well in hand. That complacency evaporates if you look out further and see that the similar gauge for 3-month volatility is the highest relative to MOVE since August 2013 -- during Europe’s sovereign debt crisis.
Volatility curves are gapping to historic wides into the vote
Similar action has been going on in the VIX and USD/JPY vol curves. The angst built in to the short-term outlooks across markets will make it very hard for risk assets to regain upward momentum.
Volatility curves show investors are more nervous about the coming quarter than they have been in a very long time. That argues that risk assets are unlikely to rebound in a meaningful way until at least after the November U.S. Elections.
Consider bonds. The MOVE index of 1-month Treasuries volatility is close to record lows after a very moderate pick up since late July’s nadir. That could lead investors to conclude the Fed has bonds well in hand. That complacency evaporates if you look out further and see that the similar gauge for 3-month volatility is the highest relative to MOVE since August 2013 -- during Europe’s sovereign debt crisis.
Volatility curves are gapping to historic wides into the vote
Similar action has been going on in the VIX and USD/JPY vol curves. The angst built in to the short-term outlooks across markets will make it very hard for risk assets to regain upward momentum.