Unresolved risk meets low volatility

Geopolitical tensions remain high, yet market volatility is surprisingly subdued, creating a puzzling disconnect. Investors, seemingly exhausted by shifting narratives, are largely holding neutral positions rather than reacting to headline risks.

This passive stance, however, is unlikely to last. A significant escalation of conflict or a credible de-escalation could force decisive market action, potentially leading to a sharp repricing of assets.

Front-end rates are currently dominating curve dynamics, reflecting sensitivity to policy expectations and economic uncertainty. While markets are tolerating current uncertainty, a shift in geopolitical outcomes will likely trigger a more pronounced volatility response.