TYVIX Weekly Report: FOMC Meeting Aftermath: Treasury Volatility Falls to Near Lows for Year

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The volatility of 10-Year Treasuries approached its lows for 2015 late Friday morning, December 18, when TYVIX fell to 4.68 on an intraday basis. On a closing basis, the TYVIX Index had not fallen this low since October 6, 2014, when it closed at 4.68. To put these numbers in perspective, the median TYVIX value since 2003 is 6.20. One might conclude that the Treasury market has settled down on assurances by the Federal Open Market Committee that additional increases in the target federal fund rate will come gradually and will depend on continued favorable economic conditions. (As widely expected, the Fed on Wednesday raised the fed funds target by 25 basis points.) The equity market appears slightly less sanguine; while VIX is down for the week, it still is close to the 20 mark, which is higher than its median of 16.88 since 2003. Foreign exchange volatility also has settled down.

Figure 1.  Performance of TYVIX vs. VIX and foreign exchange volatility indexesfig1-dec-18
Figure 2.  
Weekly Statistical update

Looking Forward

Forward prices of VIX and TYVIX are in contango. Forward prices of EUVIX, BPVIX and JYVIX still have a V-pattern: backwardation of the first month relative to spot and then contango out to the third month.

Figure 3. Term structures of VIX-like volatility indexesfig3-dec-18