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Drivers of Option-Implied Interest Rate Volatility, Accessible Data
Figure 1. Interest Rate Volatility and Survey-Based Uncertainty (Disagreement) Measures of CPI and Real GDP Growth
Figure 1 shows the time series of swaption-implied volatility of one-year swap rate at a horizon of one year (dashed black lines in the right and left panels) alongside measures of uncertainty of CPI inflation over the next year (red line in the left panel) and uncertainty of real GDP growth over the next year (blue line in the right panel) calculated from forecasts from Blue Chip Economic Indicators. Both panels show quarterly averages of monthly data from January 1995 to July 2024. The shaded areas represent the effective lower bound periods. At a horizon of one year ahead, the swaption-implied volatility of the one-year interest rate rose sharply since late 2021, reaching their highest levels in over a decade. Although these measures declined moderately since early 2023, they remain at around the 70th percentile of their historical distribution.
Note: Swaption volatility line corresponds to the swaption-implied volatility of one-year swap rate at a horizon of one year ahead. Values are quarterly averages of monthly data from January 1995 to July 2024.
Source: Barclays Research; Blue Chip Economic Indicators; ICAP.