High VIX Means Credit Volatility Might Be the Place to Hedge
- Equity-swing measures elevated relative to historical levels
- Tallbacken’s Purves sees a ‘good opportunity’ for protection
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The disconnect between the surge in price swings in equities and a much calmer corporate bond market offers an opportunity for investors to hedge risk via credit, according to Tallbacken Capital Advisors LLC.
The ratio of the Cboe High Yield Corporate Bond ETF Volatility Index to the Cboe Volatility Index is near historically low levels, data compiled by Bloomberg going back to 2015 show. That feeds in to the pricing of options which means investors can pick up relatively cheaper portfolio buffers in the credit market, against the possibility of a pull back in risk sentiment, said Michael Purves, strategist and chief executive officer at Tallbacken.