Rates markets took center stage last week so that’s where the majority of my focus landed in this week’s episode. After a quick review of the market models and VIX complex, I examine a big jump in Treasury volatility, an acceleration in 10-year yields, and a rare buildup of correlation dislocations across credit, currency, and equity markets—all flashing troubling signals even as rotational mechanics and the VIX futures curve continue to point to stability in equity indices.
Topics covered this week:
-Yield acceleration and a breakout in the MOVE index
-Persistent VIX futures contango and healthy mechanics
-Significant differences in the variance risk premium across time
-Implied correlations touching down at cautionary levels (again)
-High-yield bonds diverging from equities
-Correlation extremes across banking, the US dollar, and rates
Here we go!
