It’s Déjà VIX All Over Again

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The same up-and-down vibes that marked the end of 2015 lifted volatility in the first week of 2016. The Shanghai stock market plunged on Monday. Oil prices were on a downward trend all through the week, and on Friday the U.S. Labor Department reported an additional 292,000 nonfarm payroll jobs were added in December. On Thursday, the economic malaise in China pushed the CBOE Volatility Index (VIX) to a weekly high of 25.86, 42 percent higher than at the close of 2015. The upbeat job report on Friday morning then clipped a couple of points from the VIX Index. The volatility of the Yen/Dollar pair followed a similar trajectory. The JYVIX reached a maximum of 11.90 early on Thursday, 41 percent higher than at the close of 2015, then dropped to 11.33 Friday morning. The CBOE/CBOT 10-Year U.S. Treasury Note Volatility Index (TYVIX) also increased, but in more muted fashion. The TYVIX Index has been on average 6 percent higher than last year’s closing value, but lost some ground on Friday morning.

Figure 1. Weekly update of volatility indexes, Treasury yield

Figure 1

As of 12 p.m. ET Friday, the future of volatility reflected the markets’ wobbly outlook. VIX was in backwardation, JYVIX in contango, EUVIX and BPVIX were in between, and TYVIX was almost flat.

Figure 2. Forward prices of volatility

Figure 2