This is the VIX (S&P500 implied volatility) futures curve a year ago showing the implied volatility term structure as it was on 3/8/11.
This is the VIX futures curve now:
See the difference? While the front contract for implied volatility futures is roughly where it was a year ago, the curve is far steeper now. The contracts 6-8 months out have VIX at close to 30%. The markets are pricing in a material spike in volatility by the mid of 2012. The market is basically saying "the world is OK for now, but just wait until late summer". That makes some sense given all the uncertainty, but it is not at all consistent with movements in credit spreads.
The scatter plot below compares the levels of VIX futures six months out (the far end of the curve) with the 5-year Investment Grade (IG) CDX (index of investment grade corporate CDS) spread. The current pricing is a clear outlier. If the credit markets are right, the implied volatility curve is way too steep (by 2-3 "vol points"). If the medium term equity options markets (that determine the implied volatility curve) are right, the IG CDX spread should be closer to 120 basis points vs. 96 bp where it is today.
Buying IG CDX protection and shorting longer-term equity index options would be a trade that takes advantage of this apparent disconnect between the two markets.