Arkus Focus May 2015
Lower for even longer
by Niall O'Connor
- Volatility trends were generally downward during April, and volatilities were mostly medium relative to their 12-month averages.
- Realised volatility (of Eurostoxx equities over 30 days) rose slightly again from 15.7% to 17.8% (medium to High).
- Equity markets moves were moderate and mixed but with a big rise in China. Volatility trends were upwards, with the exception of North America. Sector volatilities ranged from 8-10% (but with Energy falling to 14%). All major sectors had medium volatilities relative to the last 12 months except Financials at low.
- Sovereign bond prices were generally flat during the month. Spanish bond yields rose to 1.4%. Bond volatilities trends were downwards with ECB QE squeezing out volatility and ended at 3-4% (and 1.6% in Japan). All dropped from High to medium; Germany fell to low.
- In FX sterling strengthened and the Dollar weakened vs the euro. Volatility moves back downward: e.g. €/$ to 10.5%. Volatilities were all medium or High compared to the last 12 months.
- Option volatility will have been driven mostly by moves in underlying prices during the month. Volatility of volatility for the US was up slightly at 112% (medium).
- Commodities’ price moves were small with the exception of Oil which reversed the previous month’s drop and rose to $64. Volatility moves were generally small: e.g. Oil up fractionally to 45% (High).
- Real Estate (equity) price moves were mixed: Japan up and US down. Volatility changes were downwards: to 12% in the US (High down to medium), and to 12% in Europe (also High down to medium).
Read the full Market Risk Report here.
View the online version of our May Newsletter here.