The tale of falling corporate interest payments in an environment of sharply higher rates is by now familiar.

Indeed, I mention it every week, and in many cases multiple times per week.

Rates have increased exponentially, but thanks in no small part to a debt binge in 2020 and 2021 when rates were at 5,000-year lows, many corporates are insulated from higher borrowing costs.

There are multiple angles to this story, and one I hadn’t considered until Tuesday was the link to a simple ratio often cited by market observers on finance-focused social media, and occasionally by equity derivatives strategists.

Over the summer, the VIX/MOVE ratio collapsed to near three-decade lows. I should note: Those aren’t apples to apples. I don’t like the comparison. As one rates strategist reminded me on Tuesday, the ratio may work in a historical context but, as he put it, “fundamentally, a snapshot of the ratio has no informational value.”

With that caveat out of the way, there are a number of factors which help to explain the decline, and there isn’t enough time in the day to pen an exhaustive account in that regard. But in a recent volatility outlook piece which I finally got around to reading this week, SocGen’s Jitesh Kumar and Vincent Cassot offered an interesting take, which I hinted at in the chart text.

“[The] interest burden for corporations went much lower even before the pandemic,” they wrote, adding that “overall, it’s the public sector (or the government) that’s picking up most of the bill from higher rates and transferring the benefits to the private sector.”

The figure on the left above illustrates the point, and the chart header on the right is straightforward: If you ask Kumar and Cassot, the drop in the VIX/MOVE ratio is a reflection of the shifting interest rate burden.

“From this perspective, the dislocation between the VIX and MOVE indices should not be a surprise at all,” they wrote. “If anything, the divergence should be stronger.”