Volatility Gauges Tumble to New Lows Amid Complacency Fears

  • Bank of America MOVE Index closes at an all-time low on Monday
  • VIX within 2 points of record intraday low reached last month

JPM's Santos Reminds Investors That Volatility Is Normal

The markets are alive with the sound of ‘zzzzzz’ as the latest trading session marks yet another another record low for volatility gauges.

Bank of America’s MOVE Index, which gauges volatility in the U.S. Treasury market, has tumbled to an unprecedented 46.9 at the close of Monday’s trading session. The move means investors in the world’s largest bond market are shrugging off the potential for price swings, even as two titans of the industry up their bets on an uptick in U.S. inflation.

Meanwhile, their equity counterparts are in a similarly sanguine spot. The CBOE Volatility Index is 2 points shy of touching the all-time low of 8.84 it reached in July. At just 9.95, the measure is well below its five-year average of 14.84. Short VIX futures positions have also hit a fresh peak, as investors bet the subdued market conditions will last.

Developed-market currencies on the precipice of tighter monetary policies in the U.S. and the euro area are also uncharacteristically calm, with a JPMorgan index of expected volatility trading at 8, compared with a long-term average of 10.37.

Traders in the more turbulent emerging markets also aren’t placing bets on future swings in currencies, with the daily price change in three-month, at-the-money forwards -- a gauge of implied volatility -- at muted levels in recent sessions.

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