TYVIX Weekly Report – The Janet Yellen Factor

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Encouraged by the downward trend in the U.S. unemployment rate and unfazed by a third contraction in the ISM Manufacturing Index, Federal Reserve Chair Janet Yellen told the House Financial Services Panel on Wednesday that a rate hike is still “a live possibility” for the December meeting of the Federal Open Market Committee (FOMC). As she testified before Congress at mid-week, TYVIX resumed the upward path it had followed since October 22. Interestingly, positive reports on jobless claims on Thursday and non-farm payrolls on Friday (the October employment report showed U.S. employers added 271,000 jobs last month, far exceeding economists’ expectations for an increase of 183,000) offset the November 4 advance and reset TYVIX at about the same level as it was a year ago.

Figure 1.  TYVIX Closing and Intraday Levels1

 

 Figure 2. Weekly Update on Volatility and Volatility Futures2

Figure 3. Term Structure of Cross-Asset VIX Futures

The term structure of volatilities across assets shifted higher over the week. The term structure of EUVIX is in backwardation, whereas the term structure of VIX, TYVIX, BPVIX and JYVIX are all in contango. 3