The Chicago Board Options Exchange Volatility Index (VIX) advanced for a record eighth day as surging Spanish and Italian bond yields intensified concern about the European debt crisis.
The gauge known as the VIX, which measures the cost of Standard & Poor’s 500 Index options, rose 8.4 percent to 20.39 today. That’s within 0.8 percent of its lifetime average of 20.54, according to data compiled by Bloomberg. The S&P 500 fell 1.7 percent.
Spanish bonds dropped as Economy Minister Luis de Guindos declined to rule out a rescue for the nation. Concern over Europe coupled with a report showing less U.S. job creation than economists projected has sent the S&P 500 down 4.3 percent in five days, the biggest loss since November.
“The VIX movements reflect the increased fear off the recent performance of the S&P 500, the poor unemployment number, and rekindling of fears out of Europe focused on Spain and Italy,” Nelson Saiers, who oversees about $650 million as chief investment officer at Alphabet Management LLC in New York, said in an interview.
The measure of expected S&P 500 volatility reached its lowest level since June 2007 on March 26 as the S&P 500 had its biggest first-quarter rally in 14 years, climbing 12 percent. The benchmark gauge for U.S. equities reached 1,419.04 on April 2, its highest level since May 2008, after reports showed retail sales and manufacturing improved.
The VIX, which tumbled as much as 70 percent since reaching a 29-month high on Aug. 8, has advanced 32 percent in the past eight trading sessions.
“It’s a significant string of increases, but there’s no panic in the volatility market,” said Ben Londergan, chief executive officer of Group One Trading LP, the Chicago-based primary market maker for VIX options. “This is more likely an increase from a low level in the VIX combined with a healthy and legitimate sell-off in equities.”
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