Us Treasury Curve In The Spotlight

By Craig Bewick
MAR 18 2021

Yields at the longer end of the US Treasury curve stole the financial news headlines again today as CME Group Treasury futures prices fell.  The drop in prices in the following Treasury products led to the corresponding increases in implied yields (remember prices and yield move inversely to one another):

10-Year Treasury Implied Yield:  From 1.2864 to 1.3897

Ultra 10-Year Implied Yield:         From 1.6963 to 1.7895

US Bond Implied Yield:                  From 2.07 to 2.1367

Ultra T-Bond Implied Yield:          From 2.4508 to 2.4870

Also a somewhat interesting move in the shape of the curve as the 10-Year and Ultra 10-Year moved more than the longer maturities.  Implied volatility in the Treasury options continues to trade at relatively high levels versus the last six months. 

US Equity prices, ultimately, wound up in negative territory with all four major indexes declining and the Nasdaq, once again, leading the losses.  It seems the Nasdaq has been more sensitive to the interest rate increases over the last several weeks.  In fact, for most of the trading day, the Dow Jones Industrials was in positive territory.  Implied volatility in the Index options markets increased with the 30-day implied in the S&P 500 rising from 15% to 16.75% and in the Nasdaq-100 from 25% to nearly 28%. 

Not lost in the Interest Rate and Equity moves was a fairly dramatic sell-off in WTI Crude, down 7% from yesterday’s close.  Not surprisingly, implied volatility spiked in WTI Crude Oil options markets from about 36% to almost 44% (30-day vol), the highest level we’ve seen since last December.  The Puts gained relative to Calls as well with the 25 Delta puts trading at an implied volatility about 7% over the Calls.  The QuikStrike graph below illustrates the price and volatility moves nicely.  

ABOUT THE AUTHOR

Craig Bewick has spent 25 years in futures and options markets, starting at CBOT and CME working in risk management, regulatory, technology, product management and client development. 

Connect with Craig at activetrader@cmegroup.com

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