Due to staff schedules, we are writing the Key Takeaways section during early afternoon trading hours today. With a few hours left in the day, US Stock prices are mostly lower as are US Treasury Yields, particularly at the long end of the curve. With the move lower in equity prices, implied volatility CME’s Equity Index options continued to move higher, though in the Nasaq-100 is still trading below the six month average closing level. ,
According to the Micro Treasury Yield contracts that CME launched a few weeks ago, the yield on the 10-Year Treasury Note fell by about 4.6 basis points while the yield on the 2-Year Treasury fell by just about .3 basis points. This represents what we’ve referred to in this column recently as a slight flattening of the yield curve. In other words, the spread between the yield on the 2-Year and 10-Year narrowed today. As we’ve also mentioned, many professional interest rate traders trade the shape of the yield curve using spreads like the “2s vs 10s” in addition to the direction of interest rates at one point on the yield curve. Somewhat interestingly, implied volatility in the 10-Year Note options at CME Group fell to recent low levels as you can see from the blue line in the QuikStrike graph below. We used the traditional 10-Year Note at CME Group as a proxy for implied volatility since we don’t list options on the new Micro Yield contracts.