Which brings us to one of the most striking VIX charts we have seen: as Citi's strategists note, over the last six months, VIX has spent more than 40 days below 10. Putting this staggering outlier in context, the index has never managed to accumulate more than 6 days that low, measured over the same time interval, over the last 30 years. Or, as today's central bankers would say after one look at the chart below which they have created "perfectly normal."
Commenting on the above charts, Citi, which has turned increasingly bearish on credit in recent weeks, says that "implied vol is, in other words, sailing in the same unchartered waters as corporate credit", and concludes sarcastically, "why buy vol if you believe that any selloff is impeded by a central bank backstop?"
So keep selling vol until one day vol finally explodes as CBs lose control, wiping out trillions in fake wealth in the process; just please don't use the words "market" and "price discovery" until that happens.
However, while the Friday VIX snap - which is still on the feeds and thus wasn't a fat finger error - is yet another indication of just how broken, and/or how overrun by vol sellers the market is, below we present two even more striking, longer-term perspectives on the VIX courtesy of Citi.
As Citigroup notes, even after the recent backup, the VIX index is in its 0.5th percentile – that is, historically it has been wider than currently on 199 out of every 200 days. In other words, the "you are here" on the chart below has never been more to the left.
But it is not just a question of having reached this low level of implied volatility. As much as anything it is about the extended period of time we seem to be spending there.
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