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- In August, fears of currency wars increased as the People's Bank of China depreciated the yuan, while the U.S. nervously edged closer to its first rise in rates in more than nine years. Capital fled from emerging markets in response, and many signs of heightened global risk can be found on our dashboard. Yet the U.S. markets seem to be waiting for the penny to drop; the S&P 500® has continued within the tight range it has been bound in since February.
- The VIX® Index closed yesterday at 15.25 - up three points since our last report and to its highest level for three weeks - but still relatively low. The shallow angle in the VIX futures curve continues to indicate relative confidence in the U.S. market, with longer-dated contracts remaining relatively cheap in relation to the current VIX level.
- A strong majority of our volatility measures have increased, with half now above their trailing 12-month average. The rise in Canada's volatility barometer was the most precipitous in this report while Hong Kong's HSI Volatility Index was another strong gainer.
- The disconnect between U.S. equities and credit markets continues: the S&P/ISDA U.S. High Yield CDS index rose by a further 27 basis points to close last night at its highest level for over two years. Part of this disconnect relates to the higher concentration of Energy companies in the high yield bond market, and the oil price has provided little respite. The price of crude has continued to fall and is currently at its cheapest for a decade.
