Iran’s nuclear ambitions, Syria’s bloody crackdown and Greece’s potential default are leaving markets unfazed as central bankers take unprecedented steps to prevent the global economy from crumbling.
The VIX, a measure of equity volatility known as the “fear index,” fell to 17.1 on Feb. 3, the lowest level since July, according to the Chicago Board Options Exchange. The Bank of America Merrill Lynch MOVE index, which measures swings in bond prices, closed at 72.3 on Feb. 6, about the least since July 2007. JPMorgan Chase & Co.’s index of implied volatility on currencies dropped to 10.2 on Jan. 23, its lowest since March.
While geo-political risks have risen, investors are taking their cue from policy makers from Washington to Frankfurt to Beijing who are driving down interest rates and flooding the world with cash to prop up their economies. The balance sheets of the world’s six biggest central banks have more than doubled since 2006 to $13.2 trillion, according to Chicago-based Bianco Research LLC.
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