It was another quiet, summer day in US Equities as the market looks towards tomorrow morning’s release of the May CPI (inflation) report. Interestingly, even as questions about inflation and whether the current signs of inflation are transitory or not, persist, US Treasury future prices continue to rally. In the last month, the implied yield of the Ultra T-Bond futures contract, which is the CME Group contract that most closely reflects the yield of the on-the-run 30-Year T-Bond, has increased by about 8.5 basis points. In other CME Group markets, grains futures prices were mostly higher while WTI Crude Oil and Metals prices were near steady on the day.
Getting back to the Treasury futures market, CME Group announced today that it would be launching a Micro Treasury Yield futures contract that will offer a streamlined way to trade interest rate markets with contracts based directly on yields of the most recently auctioned (on-the-run) Treasury securities in the 2, 5, 10-Year Notes and 30-Year Bond.
In the upper QuikStrike graph below you can see the recent price (orange line) and volatility (blue line) increase in the US T-Bond futures contract. In the lower QuikStrike graph, which depicts the 25 Delta Risk Reversal, you can see the relative increase in Call volatility versus Put volatility recently.