Risk and Safe Haven Effects

VIX up as GeoPolitical Risk rises. Dollar jumps on the invasion, but eases today, Treasury yields down due to safe haven effects. Anticipated interest rate increases moderate.

Figure 1: Geopolitical Risk index – Acts (blue, left scale) and VIX (brown, right scale), and Source: CBOE via FRED, Caldara and Iacoviello.

Figure 2: Nominal trade weighted value of US dollar against advanced country currencies (blue, left log scale), and VIX (brown, right scale). 2/28 exchange rate observation based on DXY index movement. Source: Federal Reserve Board, CBOE via FRED, yahoo.finance, and author’s calculations.

Figure 3: Ten year Treasury yield, % (blue, left scale), and VIX (brown, right scale). Source: Treasury, CBOE via FRED.

I find it interesting that implied interest rates 2 to 3 months ahead are fairly stable, after having dropped from mid-February.

Figure 4: Implied average of Treasury interest rates 2-3 months ahead (blue, left  scale), and VIX (brown, right scale). Source: Treasury via CBOE via FRED, and author’s calculations.