Key Takeaways with Craig

US Equities were higher to start the week but sold off throughout the day to end lower but, unlike the last couple of trading days, implied volatility moved higher.  In addition to the geo-political situation in Ukraine, the market will also be watching for the results of the FOMC meeting, expected to be announced on Wednesday.  According to CME’s FedWatch tool, Fed Funds futures continue to price in a 25 basis point hike this week but, with today’s price move, they are indicating approximately a 52% chance of a 50 basis point hike at the May 4th meeting. 

US Treasury markets were active again today from 2-Years through 30-Year.  According to the Micro Treasury Yield contracts we saw the following yield changes in US Treasuries:

  • 2 Year Treasury – 11.3 basis points
  • 5-Year Treasury – 13.5 basis points
  • 10-Year Treasury – 13.8 basis points
  • 30-Year Treasury – 9.8 basis

While volatility remains elevated in CME’s US Treasury options, the skew has normalized.  As you can see in the QuikStrike graph below, Puts are now trading at a slightly (though near even) higher implied volatility than the Calls after the Calls were bid up over the last couple of weeks.  Remember, these are options the traditional Treasury futures which are quoted in price not yield. 

CME Group commodity markets were also active as the April WTI Crude Oil contract was down another 6.6% and Gold Futures prices fell by about 1%.  Implied volatility in the options markets in both products fell but remains elevated relative to historical norms.  

Today's Future Price Action

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