Thursday, February 25, 2010

Market Review 2/25/10

The S&P 500 sold off 1.5% this morning on Greek debt concerns and higher than expected jobless claims. The VIX spot jumped to 22.7% slightly higher than the March VIX futures.

On February 8 the costs of protecting against a government debt default by Greece was trading at 425 bps. At that point the VIX was 26.5, and the S&P 500 was around 1,050. Prospects that the EU would extend a financial lifeline to Greece sent Greek bonds to their biggest rally since the introduction of the euro.
While the VIX stayed around 20 over the past week the CDS on Greece went up from 350 bps to 400 bps today. As the market started to focus on this issue again, I wonder what would happen to the VIX and the S&P 500 if the CDS on Greece would reach new highs.

Maybe this is the reason the April VIX futures are still high, and actually rose today to 23.7. The spread between the VIX spot (20.1) and the April VIX futures is pretty wide at 3.6 points.

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