Key Takeaways with Craig

Today’s CPI number, about which we’ve written over the last several days reflected the highest inflation rate we’ve seen since 1982.  Treasury yields jumped dramatically on the news and equity prices, which were only slightly lower for most of the day, sold off in the last couple hours of trading.  The market’s anticipation of more aggressive Federal Reserve interest rate hikes was reflected in CME Group’s Fed Funds futures contracts.  Some price move highlights include:

  • Micro 2-Year Treasury Yield futures up a dramatic 28 basis points
  • According to those Micro Treasury futures, the yield curve flattened today as the 30-Year “only” rose by 9 basis points
  • CME Group’s Fedwatch tool is now pricing in a nearly 100% chance of a 50 basis point increase in its Fed Funds target rate at the March meeting; up from just 24% yesterday
  • With about an hour left before the cash equity market close, the E-mini Nasdaq-100 futures were down by nearly 2% and the E-mini S&P 500 futures were down by about 1.5%

Implied volatility in CME’s Equity Options markets rose today, but remains well below the elevated levels we saw during the January stock market price volatility.  Still, as you can see from the blue line in the graph below, 30-day implied volatility in the E-mini Nasdaq-100 options is trading above a one-standard deviation move relative to the last 12 months. 

So, as we continue to say this year, if you were looking for volatility, look no further than the beginning of 2022, as we continue to see inflation-driven volatility in several CME Group products. 

Today's Future Price Action

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