Key Takeaways with Craig

On the second trading day of 2022, US Equities were mixed with the Dow gaining just less than 1%, the S&P 500 near steady and the Nasdaq lower by over 1%.  The Nasdaq underperformance was perhaps in part due to the continuing rise in longer term Treasury rates as the Micro 30-Year future was up by about 6.5 basis points and the 10-Year was up by about 4 basis points.  During the second half of 2021, the technology-heavy Nasdaq index has been relatively more sensitive to higher interest rates.  Somewhat unsurprisingly, we saw implied volatility in the Nasaq-100 options move higher while that in the Dow options was near steady. 

Commodity markets were active, and mostly higher, today at CME:

  • WTI Crude Oil futures price was up over 1% to over $77 per barrel; the highest prices we’ve seen since late November
  • Corn prices were up by nearly 3.5%
  • Soybean prices up by about 2.5%
  • Wheat prices up by about 1.5%
  • Gold up by about .75%

Getting back to the move in the US Treasury yields, we’ve seen a fairly substantial increase in yields since the last week of December.  Specifically, according to the Micro Treasury Yield futures prices, the 5-Year is up by about 14.2 basis points since 12/28, and the 10 and 30-Years are up by about 16.5 basis points.  However, the 2-Year Yield is up by only 3.2 basis points.  This represents what we would describe as a parallel upward shift from 5 Years to 30 Years but a steepening move when looking at the 2 Year versus the other maturities.  As we’ve discussed before here in the Key Takeaways section, many professional interest rates traders trade the shape of the yield curve using spreads between the different maturities and not just the direction of interest rates at a certain point on the yield curve. 

We put together the simple chart below to depict the changes in Yield in the different Micro Treasury products between 12/28 and today.  We also included a hypothetical P&L based on a trade using the $10.00/basis point value represented by the futures contract.  We also included the spread differentials to illustrate the steepening of the curve from the 2-Year vs the other maturities and the parallel shift between the 10 and 30 Year maturity points.  

Today's Future Price Action

Traders Resources

The information in the market commentaries have been obtained from sources believed to be reliable, but we do not guarantee its accuracy and expressly disclaim all liability. Neither the information nor any opinions expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts. The information on this site compiled by CME Group is for general purposes only. All information and data herein is provided as-is. Additionally, all examples on this site are hypothetical situations, used for explanation purposes only, and should not be considered investment advice or the results of actual market experience. CME Group assumes no responsibility for any errors or omissions. CME Group, its affiliates and any third party information and content providers expressly disclaim all liability with respect to the information and data contained herein including without limitation, any liability with respect to the accuracy or completeness of any data. You use the data herein solely at your own risk. All data and information provided herein is not intended for trading purposes or for trading advice. All matters pertaining to rules and specifications herein are made subject to and superseded by official CME, CBOT, NYMEX and COMEX rules. Current rules should be consulted in all cases concerning contract specifications.

Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Due to the leveraged nature of futures trading and swaps trading, it is possible to lose more than the amount deposited in a position. Therefore, traders should not deposit more funds than they can afford to lose without negatively affecting their lifestyles. A trader cannot expect to profit on each trade, and should only devote a small amount of their available funds to each trade. All references to options refer to options on futures.

Past performance is not necessarily indicative of future performance.

CME Group, the Globe Logo, Chicago Mercantile Exchange, Globex and CME are trademarks of Chicago Mercantile Exchange Inc. CBOT is the trademark of the Board of Trade of the City of Chicago, Inc. NYMEX is the trademark of the New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. All other marks are the property of their respective owners. Each of Chicago Mercantile Exchange Inc. (ARBN 103 432 391), The Board of Trade of the City of Chicago Inc (ARBN 110 594 459), the New York Mercantile Exchange Inc (ARBN 113 929 436) and Commodity Exchange, Inc. (ARBN 622 016 193) is a registered foreign company in Australia and holds an Australian market licence.

This site does not constitute a prospectus, product disclosure statement or legal advice, nor is it a recommendation to buy, sell or retain any specific investment or to utilise or refrain from utilising any particular service. Readers should consult their legal advisors for legal advice in connection with the matters covered on this site.

CME Group is the world’s leading derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). 
Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX and COMEX.

© 2024 CME Group Inc. All rights reserved.