Rising credit stress is impacting the US stock market, as widening credit spreads signal increased default risk. The recent surge in bankruptcy filings, nearing post-pandemic highs, highlights the financial strain on companies. This is further exacerbated by a steepening yield curve, which has increased rates volatility and stressed corporate cash flows. As bond yields rise, borrowing costs escalate, putting pressure on corporate profits and potentially leading to declining stock prices. The VIX, a key measure of market volatility, is closely linked to these credit market dynamics, with increased bond volatility often coinciding with falling equity prices.
The ProShares Short VIX Short Term Futures ETF (SVXY) is currently priced at $49.34 as of 05:20 AM on Thursday, January 9.