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Today we saw 1-month realized volatility fall to 6.2%, which is fairly low on a historical basis. It may go lower still, but it is important to note that the last times it reached similar levels were in July 2024, November 2019, April 2019, October 2018, and October 2017. Each of those periods of low volatility was followed by a surge in volatility.

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The dispersion index also rose today to 34.5, a level it has rarely reached based on historical data.

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We’ve also been in one of those rare spot-up/vol-up scenarios, with the VIX trending higher alongside stocks.

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SOFR printed at 4.24% this morning, just 1 bp below the upper end of the Fed Funds target range and 15 bps above the effective funds rate. Liquidity in the overnight market remains very tight, and while funding pressures eased somewhat today, the relief was minimal.

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GC traded down to 4.24% from 4.30% yesterday, which suggests SOFR should also move lower, likely to around 4.17–4.18%. That would still leave it about 9 bps above the Fed Funds rate, indicating funding conditions remain tight.

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Based on my estimates, with the TGA reaching $890 billion yesterday, reserve balances likely fell to about $2.85 trillion. By Thursday’s SOMA release, they should be closer to $2.9 trillion. The low level of reserves is driving much of the overnight funding volatility we’re seeing.

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If we move away from volatility suppression and liquidity conditions and look at a stock like Blackstone BX (black line), it’s clear the stock is sending a message. Historically, it has a good track record of peaking before the S&P 500 (blue line). Maybe this time will be different…

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Another interesting point is that META hasn’t participated at all in the recent move higher in the index. Maybe the market is tired of all the AI spending the company has done—I don’t know—but it’s something to watch, as Meta also has a history of peaking before the S&P 500.

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It feels like the music has stopped, but the market is still dancing to its own beat, even with the lights off.

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