Week of 9/28/2026: Equities Unfazed by Spike in Rates Volatility

Mandy Xu

September 28, 2026

Link to Report: Macro Volatility Digest

WHAT STANDS OUT:

US bond yields climbed to a two-decade high last week, yet reaction in the cross-asset vol market was mixed. While rates vol spiked to near a 1-year high, equity vol ended the week unch'd, with the VIX^® Index hovering near a 1-year low of 14.9%. This contrast is even more surprising considering the increase in yields came almost entirely from higher real yields (i.e. tighter financial conditions) rather than higher inflation expectations. Not only is the SPX^® Index back to a record high, demand for protection has also fallen to near a 1-year low. SPX 1M skew is trading in the 5th percentile low currently as investor rotate out of hedges and into upside calls. And it’s not just at the index level – about 40% of the top 100 stocks are trading with inverted call skew (a sign of extreme bullishness).
While SPX index vol was unch'd, single stock volatility increased further last week, with the VIXEQ^SM Index up another 2 pts to 38.5%. As we get closer to Q3 earnings, we see scope for single stock volatility to rise even more relative to index vol, especially against a backdrop of higher rates which have historically been a catalyst for more stock dispersion.
Among global equity indices, Brazil stands out as having the richest implied volatility ahead of its presidential election on Oct 4th. EWZ 1M implied vol has almost doubled over the past month to near a 4-year high of 46% even as realized volatility hovers at just 24%. The spread between implied vs. realized volatility, at 22.5%, is also trading at an 8-year high. The bid for EWZ vol is not surprising as elections have historically been some of the biggest catalysts for Brazilian stocks. EWZ 1M realized vol has exceeded 50% in each of the last three presidential elections.

Chart: Equity vs. Rates Volatilities Diverge