Key Takeaways with Craig
Once again, due to scheduling, we are writing the Key Takeaways column with about an hour and a half left in today's cash equity trading session.. in fact, we're writing from Toronto, Ontario, where we're enjoying balmy 33 degree spring break temperatures.
As we near the end of the trading session, US Equities are broadly higher for the second day in a row as the market seems to place more emphasis on optimism about the ongoing Russia-Ukraine talks than any fears it might have about the near inversion of the 2-Year and 10-Year Treasury yields. In fact, the Micro 2-Year Treasury Yield futures is trading just under one basis point from the Micro 10-Year Treasury Yield. It's a metric we've been watching over the last several weeks here in the Key Takeaways section as the US Treasury Yield Curve has flattened, as an inversion of those rates has oftentimes preceded a recession.
WTI Crude Oil, CME Grains and Gold futures prices all fell today, perhaps also as a reaction to Ukraine-Russia negotiations.
The options market has reacted to these price moves with lower implied volatility. CME Group Equity Index options are trading at implied volatility levels we haven't seen since mid-January. WTI Crude OIl options implied volatility, while still elevated, is trading under a one standard deviation move relative to the last three months and Gold implied is trading right around its 3 month average closing level.
As we look ahead to the rest of the week, we've got the March Employment numbers set to be released on Friday which will be another indication of the strength of the US Economy. While it's difficult to isolate what factors might be leading to increased implied volatility with so much going on, as you can see in the blue line in the QuikStrike graph below of the implied volatility curve in E-mini S&P 500 options, the options market is assigning a slightly elevated implied level to the Friday expiration than the more deferred expiries.
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