Tariff Threat Dismissed As Implied Volatilities Fall

Summary

• Implied volatilities fell across asset classes last week despite renewed trade headlines as investors largely shrugged off the new tariff threats.
• 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%.
• 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.

Cross-Asset Volatility: Implied volatilities fell across asset classes last week despite renewed trade risk, as President Trump threatened to increase tariffs on a number of trading partners. Investors largely shrugged off the threat, with credit volatility declining the most. VIXIG index came in 3.5