The VIX Jumps, Right on Cue…

An update of the weekly daily treasury statement charts for 17/6/11. Over the past few months, we’ve noted the peculiar lagged correlation between the ‘risk assets’ and the total operating balance of the US Treasury. Well, over the past few days, the VIX has jumped, and it has come right on cue…

 

Daily Treasury Statement - Operating Balance Vs S&P 500

Click to enlarge. Source: US Treasury

 

During the past week, the total operating balance of the US Treasury fell to $27 billion and subsequently rose to $134 billion.

 

As part of the public sector’s widespread ‘clean-up’ operation, the US Treasury is in the process of unwinding its portfolio of Mortgage-backed securities. On Monday, the US Treasury received around $13 billion from the proceeds of MBS sales and on Wednesday, the US Treasury received around $1 billion.

 

When moving onto the shorter-term charts, we find that they’ve timed the recent bout of market stress pretty well. In fact, the recent jump in the VIX has arrived like clockwork (see chart below). The broad thesis is that net government spending is bullish for asset prices (on a lagged basis) and net accumulations of cash are bearish for asset prices (on a lagged basis). For a more detailed interpretation of these charts see here.

 

Daily Treasury Statement - Operating Balance Vs Dow LAGGED

Click to enlarge. Source: US Treasury

Daily Treasury Statement - Operating Balance Vs S&P 500 LAGGED

Click to enlarge. Source: US Treasury

Daily Treasury Statement - Operating Balance Vs Russell 2000 LAGGED

Click to enlarge. Source: US Treasury

Daily Treasury Statement - Operating Balance Vs VIX LAGGED

Click to enlarge. Source: US Treasury

See here for our collection of rare historical economic data.

Posted Jun 17, 2011