CDS rates for the US are spiking dramatically as we approach the debt ceiling.

At the same time, interest rates vol is on the rise.

The VIX has been mostly tame due to strong tech earnings, but market breadth is in the midst of falling off a cliff.

Let’s dig ☟

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σ Remember the 2011 debt ceiling debacle?

History shows us that stock market volatility can react quite violently to uncertainty over government spending.

The VIX may be back on a 17 handle, but VVIX and skew are showing some respect to the rates market moves.

σ We’re keeping a close eye on the situation and suggest being wary of getting too complacent.

You can even see a large VIX 40/60 call back spread was traded in Sep23 expiry last week to own some tail risk.

That’s $5m spent In premium just for some protection – no small potatoes.

σ Our advice?

Stay vigilant until Congress comes to a compromise.

Or kicks the can down to September/October, as some have speculated.

➠ Get more color on this dynamic in the VIX in relation to the Debt Ceiling in the clip below from today’s Macro Options Spotlight ↴

➠ Watch today’s full Spotlight video on the Options Insight YouTube Channel ↴

Markets Sluggishly Await US CPI & Debt Ceiling Outcome | Macro Options Spotlight | May 9, 2023


➠ Our Spotlight videos on YouTube only give you a part of our daily research.

And we often leave out the juiciest details, like trade ideas.

But, right now, you can get ALL of our research for completely free by using the code RV2023 at checkout.

➠ Just you the link below, select your product of choice, navigate to check out and enter RV2023 ↴


Then you’ll be all set for an entire month of free macro research and trade ideas sent directly to your inbox.


Thank you for making it this far.

Please share this with anyone you know that may be curious about how the debt ceiling can affect volatility in markets.


Imran Lakha
Options Insight

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