Bond and equity: Diverging volatility


The CBOE Volatility Index (VIX), which measures volatility based on S&P 500 index options, remains low at around 20%, a stark contrast to bond volatility trend.

COMMON wisdom has it that bonds offer natural hedge against stocks as high-risk period will normally see a demand for stable cash-flow that is being offered by bonds increases and vice versa.

Post-pandemic, however, such a traditional correlation is being consistently challenged, explaining the magnitude of market peculiarity. These days we read about high inflation and slow growth combination or in some instances, we read the narrative along the line of “bad data should be good”.

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