Every day Brings a New Twist to TYVIX, Benchmark for Treasury Volatility

The referendum in Greece on Sunday was a non-event for Treasury volatility. TYVIX opened at 6.70 on Monday, 1.82% above its closing value on July 2nd, but by 10:30, TYVIX was back to 6.58. Equity and FX volatilities were more reactive. VIX opened 11.08% higher, EUVIX 6.71% higher, JYVIX 5.74% higher and BPVIX 3.32% higher.

After this open, Treasury prices began a rally which lasted until Thursday, as investors responded to mixed employment signals and the cautious tone of the FOMC’s minutes. On Thursday, Fed fund futures implied a higher probability that the Fed Fund target rate would only be uncorked in January 2016. The pressure to sell Treasuries seemed off. In addition, uncertainty about the European Union was driving investors to safe Treasuries. The demand from buy and hold investors at Wednesday’s auction for 10 year Treasury notes was strong, and Lipper reported a net inflow of $3.130 into taxable bond funds for the week ending on July 8th.

Then on Friday morning, Greece’s new budget plan was out and Janet Yellen stated that the economy was ready for a rate increase this year. This broke the rally with the 10 year Treasury yields popping back to 2.39, about even with last Thursday. After the speech, TYVIX was down to 6.61 even with Monday’s close.


Figure 2 shows that the frequent twists and turns of Treasury futures since April 2015 have pushed TYVIX to a new higher level.

   Figure 2: Ten-Year Treasury Futures


VXTY futures that expire from July 2015 to October 2015 are still in a tight contango pattern. With so much uncertainty, the futures have been meandering gently upward over the last two months, much as TYVIX has.

   Figure 3: TYVIX Futures