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Complacency

High yield Option adjusted spreads are close to the lowest they’ve been over the last 30 years. The MOVE volatility index, that tracks the volatility of US treasury futures is crossing down its average of the last 20 years and the VIX index it’s close to minimums at 14. If we were to use those indicators to track complacency, we could say it’s very high. It doesn’t seem appropriate for a market that has high valuations on the equity side, very concentrated on a handful of names and with a corporate sector that faces a maturity wall that will be refinanced at significantly higher rates that current yields, issued during #zirp. We’re entering the summer period which are historically more volatile months and we are in an electoral year, getting closer to election date, just 5 months away. Will complacency remain high?


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