Wednesday, September 17, 2008

Volatility Catastrophe Graphic

Catastrophe may not be exactly the right word here, but I needed a title with which to introduce the graphic below, which is a ratio of the VIX to the 3 month T-bill yield (VIX:IRX ratio).

The chart goes back to beginning of the VIX data in 1990 and even in a log scale demonstrates that the current environment is several orders of magnitude more concerning (at least from a volatility and flight to safety perspective) than any other day in the last 19 years.

For more background on this particular ratio, check out Expanding on the VIX and the 10 Year Treasury Note Yield and Fear and the Flight to Safety.

[source: StockCharts]

64 comments:

Bill Luby said...

FWIW, the VIX:IRX ratio is now over 170...

gautsid said...

More postings about the VIX:VXW ratio please.

Great work, and thanks for updating more frequently during these interesting times.

Redshark said...

Yes, thanks for the great work.

Is there any index like this that goes back before 1990?

It would be interesting to see this during the crash of 1987.

Keep up the good work.

Bill Luby said...

Thanks for the feedback.

Regarding the VIX:IRX ratio, there is VXO data going back to January 1986, but I am not able to do a similar ratio graph for VXO:IRX at StockCharts.com

Perhaps when things calm down a little I can look at some other alternatives for a VXO:IRX ratio chart.

Cheers, good trading, and be sure to have some dry power handy at all times,

-Bill

Redshark said...

Bill,

I would be interested in seeing what ever you have, but I was actually referring to the IRX. The level of the IRX is really interesting here (thank you for pointing it out). In fact, the IRX might even deserve to be shown in the bottom panel of your chart. Just a thought.

Cheers.

Anonymous said...

Bill,

is this the lowest ever on record for the IRX? Like holy cow, it almost 0% interest rate (well actually it's at 0.02%.) looks like we're heading into 1990s Japan-like recession/deflation scenario but much worse.

Jimmy

Anonymous said...

The VXO:IRX ratio on Oct 19, 1987 was 2.35.

This is why one needs to be cautious when doing analysis on ratios. They show significant changes over time.

Anonymous said...

typo there, it's 0.2% 3 month treasury bill interest rate.

jimmy

andy said...

When I look at your charts, I can only see to the end of 2006. Thus, I am not able to visually grasp your point. Is there a setting on ie that I can change, or is it related to the site.

Thanks.

Anonymous said...

This chart ends at 2007. I can't see what you are referring to.

Anonymous said...

t-rates at lowest rate since the great depression.

jimmy

Bill Luby said...

Andy and anon,

I'm afraid my graphics are not compatible with all monitors. Sorry for the inconvenience.

The easiest workaround is to right click on the image, highlight "Copy Image Location," and paste the link into a new browser window.

I hope this helps.

Cheers,

-Bill

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