Despite a CPI number that indicated higher inflation than we’ve seen since 2008, US Equity indexes rose slightly as did US Treasury futures prices (indicating a downtick in yields) while implied volatility in both of those asset classes fell. There seems to be continuing debate on whether the recent inflation increases are temporary (“transitory”) or a more permanent trend.
A lower volatility environment characterizes many of CME Group’s major products as we head into summer (at least those of us here in the Northern Hemisphere). Looking at six months of data in several different products from the six asset classes traded at CME Group, we find that 30-Day volatility is at or near the six-month low levels. One notable exception is the grains markets which continue to see volatile price movement.
We chose a sample of four products on which to create implied volatility graphs using QuikStrike data that you can see below. As you can see, E-mini S&P 500, WTI Crude Oil and Gold implied volatility is near the lowest levels in six months. In order to contrast that with the grains markets, we included a graph of Corn volatility as well (the different color is just used to differentiate the relatively high implied volatility level in Corn versus the other products we looked at).
Of course, as we’ve also discussed here in the Key Takeaways section, these low volatility conditions have the potential to change quickly and sometimes, unexpectedly.