VIX rises as geopolitical risk rises. Dollar jumps on incursion – eased today, US Treasury yields fell due to safe-haven effect. Rate hikes are expected to be modest.
figure 1: Geopolitical Risk Index – Acts (blue, left scale) and VIX (brown, right scale), Source: CBOE via FRED, caldara and iacoviello.
figure 2: Nominal trade-weighted U.S. dollar against developed-country currencies (blue, left log scale) and VIX (brown, right scale). Source: Federal Reserve Board, CBOE via FRED
image 3: Ten-year Treasury yields, % (blue, left scale) and VIX (brown, right scale). Source: Treasury, CBOE via FRED.
What I find interesting is that the implied rate for the next 2 to 3 months is fairly stable after falling in mid-February.
Figure 4: Implied mean (blue, left log scale) and VIX (brown, right scale) of Treasury bond rates for the next 2-3 months. Source: Treasury via fCBOE via FRED, and author’s calculations.
