Mandy Xu
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July 14, 2025
Link to Report: Macro Volatility Digest
WHAT STANDS OUT:
- Implied volatilities fell across asset classes last week despite renewed trade headlines as investors largely shrugged off the new tariff threats. Credit volatility declined the most, with VIXIG index falling over 3 pts to 23bps vol, trading almost 1 std. dev. below its long-term average and screening as the cheapest cross-asset vol. All this is far cry from the last time President Trump threatened large-scale tariffs against US trading partners, when implied volatilities surged across asset classes following the “Liberation Day” announcement. The lack of a reaction this time shows investors have grown desensitized to tariff headlines and view this as just part of a negotiating tactic toward an eventual deal.
- Among international equities, Brazil was the only country to see much of a reaction to Trump’s tariffs, with EWZ 1M implied volatility gaining 2 pts wk/wk to 25%. In contrast, both Mexico and European equity vols declined, with SX5E 1M implied vol down 1.2 pts to 14.2%.
- As implied volatilities have reset lower, term structure has steepened across the board, with the notable exception of RTY where the curve remains flat/inverted. Alongside the steepening in the SPX® vol curve, we’ve also seen the VIX® futures curve steepen as well, with the spread between the 2nd vs. 1st month future widening to near a 1-year high of 2%.
Chart: VIX Futures Curve Steepening to Near 1-Year High
Source: Cboe
