Volatility in global commodities, currencies, stocks and rates dropped to a record as the world’s biggest central banks pumped financial markets with liquidity to help stimulate growth amid low inflation.
Bank of America Corp.’s Market Risk Index dropped to minus 1.27 on June 6, the lowest reading since at least 2000. JPMorgan Chase & Co.’s Group-of-Seven Volatility Index of currencies closed at a record-low 5.61 after a government report showed U.S. jobs gains were close to economist forecasts, fueling bets the Federal Reserve won’t adjust its monetary-easing policy. European Central Bank officials last week unveiled new measures to stoke the euro-area economy.
The U.S. payrolls report “offered yet another data point supporting the view that the Federal Reserve will keep repressing volatility as it attempts to stimulate the economy through the channel of financial markets,” Mohamed El-Erian, chief economic adviser at Allianz SE, wrote in a Bloomberg View article today. “The persistence of such low volatility will depend on more than an unchanged Fed policy stance.”
The Chicago Board Options Exchange Volatility Index, the gauge of Standard & Poor’s 500 Index options prices known as the VIX, fell to the least since February 2007 on June 6, while gold-price fluctuations tumbled to a 14-month low today. The metal’s 60-day historical volatility slid to 12.26, the least since April 2013.