News & events

Should we worry about the flattening of the yield curve?

Aftershocks

by Niall O'Connor

  • Volatilities declined from their very elevated levels of the prior month. However most assets’ volatilities remained high relative to their 12-month averages, with the exception of FX at low to medium.
  • Realised volatility (of the Eurostoxx index over 30 days) fell from 18.0% to 15.2% (high).
  • Equity market price moves were again negative on the month. Volatility trends were all downwards. Sector volatilities ended at 10-24% and were all high relative to the last 12 months.
  • Sovereign bond price moves were again small. Volatility moves were mostly downwards, ending at 3-6% (but up to 1.4% in Japan). All were high, except Germany at low.
  • FX moves were small. Volatility moves were also small and they ended at 4-7%. Volatilities relative to the euro were again low to medium.
  • Option volatility will have been driven both by moves in underlying prices during the month and volatility of volatility, which dropped back for the US to 174% (medium).
  • Commodities’ price moves were again all negative. Volatility moves were mixed e.g. Oil up to 24.8% (high), and Copper down to 14.7% (low).
  • Real Estate (equity) price moves were positive despite negative equity markets.Volatility moves were all downwards and finished at 11-15% (medium to high). PE Funds fell as did hedge funds, with volatility moves flat to down.

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