Us Treasury Yields Keep Moving

By Craig Bewick
NOV 10 2021

US Equity Indexes were down just slightly for most of the day even after the CPI report showed the highest inflation rate in 30 Years, but fell more sharply in early afternoon price action.  The Dow Jones Industrials were down by about .75%, the S&P 500 by about 1% and the Nasdaq by about 1.75%.  Not surprisingly, implied volatility in the Equity options markets, which we’ve by writing about and which has been steadily moving higher, rallied again today.  30-Day implied volatility in the E-mini Nasdaq-100 options has risen from about 15.6% to over 20% in just the last week. 

US Treasury markets remained active today as yields jumped from 2 Years all the way out to the 30-Year with the CPI reading which reflected a 6.2% increase over last year.  The yield curve between the 5-Year and the 10 and 30-Year maturities continued to flatten as the Micro 5-Year Treasury Yield showed an increase of over 14 basis points while the Micro 10 and 30 – Year Yields rose by about 10 and 9 basis points respectively. 

Along with the price moves in the Treasury futures, we’ve also seen movement in the Fed Funds futures contracts which is reflected in CME Group’s FedWatch tool.  This tool seeks to estimate the likelihood of a change to the Fed’s Target Fed Funds rate at each meeting using the price of Fed Funds futures. As you can see in the screenshot from the FedWatch tool below, it is now reflecting a 17.2% probability of a 25 basis point rate hike at the March 22 meeting. 

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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