U.S. high-yield bond spreads widened 0.97 percentage point to 6.96 percent in the first two months of the second quarter, according to Merrill Lynch’s U.S. High Yield Master II Index.
The Chicago Board Options Exchange Volatility Index, or VIX, which measures the cost of buying insurance against drops in the Standard & Poor’s 500, had an average price of 20.02 so far in the second quarter, up from 18.20 in the first quarter and 16.76 a year earlier.
Typically, volatility brings spikes in trading volume as money managers change holdings in response to the environment. That hasn’t happened in recent months, Freeman said.
“The bouts of volatility aren’t driving a lot of volume because, for the most part, portfolios have remained pretty defensive and utilized little leverage, so there’s not much portfolio churning or repositioning,” he said. “The stability in the first quarter wasn’t long enough to drive a risk upgrade.”
Greece is prompting declines as banks face questions about whether they’re experiencing a so-called secular, or lasting, shift in their capital-markets businesses amid new regulations and slower global growth. The industry will see little-to-no growth in the total revenue pool over the next few years and needs to cut 20 percent to 30 percent of its managers, Boston Consulting Group Inc. said in an April 26 report.
JPMorgan Chief Executive Officer Jamie Dimon, 56, and Goldman Sachs CEO Lloyd C. Blankfein, 57, are among top bankers to argue the current slowdown is a cyclical decline that will bounce back.
“We’re in a cyclical business, we’ve always said we’re in a cyclical business,” Goldman Sachs President Gary Cohn, 51, said at an investor conference last month. “And we’re in that part of the cycle where our client base is tending to be more conservative than it is in the up parts of the cycle.”