Key Takeaways with Craig
US Equities fell during another day of active price movement in many of CME Group’s asset classes. Equity prices were trading lower earlier in the day but losses steepened after comments from Federal Reserve Chairman Jerome Powell suggested that the Fed might have to be more aggressive with interest rate increases to combat inflationary pressures.
WTI Crude Oil and Grains futures prices rose again today:
- WTI Crude Oil futures price was up by over 7.5%
- Corn futures prices were up by 2%
- Soybeans futures prices were up by about 1.5%
- Wheat futures prices were up by another 5%
US Treasury yields jumped again today as the Micro Treasury Yield prices reflected the following moves:
- 2-Year Micro Treasury up by nearly 15 basis points
- 5-Year Micro Treasury up by about 19 basis points
- 10-Year Micro Treasury up by about 15.3 basis points
- 30-Year Micro Treasury up by about 10.3 basis points
It’s also worth noting that the 5-Year Micro Treasury is reflecting a higher yield than the 10-Year. In addition to those Treasury instruments, CME Fed Funds futures also moved on the news and CME’s FedWatch tool reflects those price moves:
- The FedWatch tool is now reflecting a 63.9% chance of a 50 basis point hike at the May meeting; up from 44% on Friday
- The tool is also reflecting a 59.3% chance that the target rate will be 100 basis points higher than the current rate at the June meeting
Finally, while implied volatility in many of CME’s options markets has come down from recent highs, it is still elevated in almost all of our 6 asset classes. The chart below, compiled with QuikStrike data shows the current 30-Day implied volatility in at least one product from each asset class compared to the average closing level over the last 5 years. As you can see, in relative terms, the implied volatility, even after coming off of recent highs, is still extraordinarily high.
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