As reported earlier this week in the Financial Times, the standard deviation for economic forecasts for the U.S., EK, EU and Japan all are near their lows, with survey firm Consensus Economics reporting very little dispersion of GDP year-ahead forecasts. More generally, there is a consensus that worldwide economic growth looks bleak, and that a Federal Fund target rate hike is improbable in the near future. Accordingly, investors are taking a pause. In particular, the volumes of trading in CBOE SPX and CME Treasury options have decreased from their summer highs. While VIX and TYVIX held up in September, they are now reflecting the slowdown and have dipped below their median values since 2003 (Figure 2).
Figure 1. September ADV in 10-Year Treasury options and SPX options vs.TYVIX and VIX
Figure 2. Weekly VIX Indexes Statistics
Term Structure of Futures
Both VIX and TYVIX futures remain in backwardation. The term structure highlights the more pronounced retreat of VIX in this period of collective uncertainty.