There is no real way to quantify 2,000,000 people protesting their government, but the CBOE Brazil ETF Volatility Index (VXEWZ – 38.47) came pretty close this week rising over 22% on the week. On Thursday it actually closed above the 40.00 level for the first time since a year and a week ago on June 13, 2012 when VXEWZ closed at 40.02. What was different on that day was the July 2012 VXEWZ future closed at 40.00 on that day while the July 2013 VXEWZ future closed at 32.50. This time around it appears the market expects the problems in Brazil to be short lived. As a point of reference, despite the July 2013 VXEWZ futures being at 40.00 on June 13, 2012 to contract actually settled at 28.53. I’m planning on keeping a close eye on the July VXEWZ futures and continue to compare this summer to last summer’s action in Brazilian market volatility.
On a percentage basis the CBOE Emerging Markets ETF Volatility Index (VXEEM – 33.61) was up more than VXEWZ this past week. However, VXEEM was coming off a lower base than VXEWZ. The Brazilian market had been in turmoil for a few weeks and VXEWZ was already trending up. VXEEM (and the rest of the world) is sort of playing volatility catch up with the Brazilian market. Both are now at elevated levels and both curves finished the week in a state of steep backwardation.