Volatility-linked ETFs continue to decline with the CBOE Volatility Index, or VIX, hitting its lowest levels since 2007.

The VIX briefly fell below 14 on Tuesday to the lowest intraday level in five years. The Dow Jones Industrial Average rallied more than 200 points after JP Morgan (NYSE: JPM) raised its dividend.

The Federal Reserve on Tuesday kept short-term rates near zero and announced the results of the latest round of bank stress tests after the closing bell. Citigroup (NYSE: C) was among the four banks that failed.

The VIX is falling to multiyear lows as U.S. stocks continue to churn higher from the October low, and Treasury yields are also moving higher this week.

The VIX is down 30% since last Tuesday, WSJ.com’s MarketBeat reports. “As the price to pay for portfolio protection against future S&P 500 declines has become extraordinarily cheap, the question investors should be asking themselves is whether this is a calm or complacent market,” it said. “Volatility has nearly been wiped out of the market this year; stocks have marched on a slow, steady path higher for much of 2012.”

Exchange traded products that track volatility have declined sharply along with the VIX. They include iPath S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX), ProShares Ultra VIX Short Term Futures ETF (NYSEArca: UVXY) and VelocityShares Daily 2X VIX Short Term ETN (NYSEArca: TVIX). [Volatility ETFs See Outflows]

The funds are indexed to VIX futures contracts, so they don’t follow the spot price.

“People are realizing that the world is not ending,” said John Canally, strategist at LPL Financial, in a Bloomberg report. “There’s a lot of good positive momentum in the market.”

iPath S&P 500 VIX Short Term Futures ETN

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