The missing Volatility

Just 9 weeks ago the Volatility Index closed at 30.11. Today it closed at 13.51. At -55%, that’s the largest 9-week decline in history.

Vol has been smashed even though Fundamentals are weaker, Political Risk higher, and Society more volatile.

One reason could be China’s total social financing (TSF) growth surged to its highest level on record last month, indicating that Beijing’s recent push for more lending to offset a slowdown is taking effect,Caixin reports.

TSF, a gauge of the economy’s credit and liquidity, rose to Rmb 4.64 trillion ($684.93 billion) in January – a big jump from December’s reading of Rmb 1.59 trillion, according to People’s Bank of China data. This mindboggling credit growth Liquified the system and allowed the volatility to be kept suppressed.

This will reverse just as violently as it was smashed.

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