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Volatility index spikes on rising U.S. treasury yields and hawkish interest rates

EditorRachael Rajan
Published 2023/10/04, 23:32
© Reuters.

The CBOE Volatility Index (VIX), often referred to as the stock market's "fear gauge", has seen a significant surge, surpassing critical moving averages, indicating increased concerns in the financial markets. This uptick, primarily driven by an unprecedented rise in U.S. Treasury yields to levels not witnessed since 2007, was reported on Wednesday.

Key factors contributing to this rise include a growing government deficit, the Federal Reserve's quantitative tightening, and a hawkish stance on interest rates. This surge in yields has led to a notable depreciation in assets such as the iShares 20+ Year Treasury Bond ETF (NASDAQ:NASDAQ:TLT).

Goldman Sachs emphasized the impact of these elevated rates on corporate earnings in its recent analysis. Investors looking to gain exposure to this heightened volatility can consider ETFs like the Proshares Trust VIX Short-Term Futures ETF (NYSE:VIXY) and the 2x Long VIX Futures ETF (NYSE:UVIX). The latter offers leveraged exposure to the performance of the S&P 500 VIX Short-Term Futures Index.

As financial markets continue to react to these developments, investors are closely monitoring these volatility indicators and adjusting their strategies accordingly.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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