Key Takeaways with Craig
US Equity Index prices struggled to find a clear direction for most of the trading day but a late afternoon sell-off led to fairly sharp declines at the cash equity market close. The Nasdaq and Russell 2000 Indexes were down by over 2% and the Dow Jones Industrials and S&P 500 were down by nearly 1% and just over 1%, respectively. We saw an uptick in implied volatility in CME’s Equity Index options markets, though it remains well below the spike we saw about a month ago.
Energy markets at CME were mixed as WTI Crude Oil futures prices fell by about 3% while Natural Gas futures prices were up by over 5.5%. Natural Gas futures prices have gradually risen by about 32% since the middle of March, when they were trading at 4.595 (versus today’s 6.059). Similar to the graphs we published yesterday, we’ve published May Natural Gas implied volatility, price and skew, both current (bright green) and in each year since 2016. As you can see from the bottom portion of each graph, the price is substantially higher than it was at this time of year in any year since 2016. The upper portion of the top QuikStrike graph shows that implied volatility was only this high in 2020. The upper portion of the lower graph shows that Calls are trading at more of a premium relative to Puts than in any year since 2016.
Another notable move in today’s markets was in Treasury yields where we saw big increases. The Micro Treasury futures contracts rose as follows:
2-Year – 2.593 (+ 9.6 basis points)
5-Year – 2.706 (+12 basis points)
10-Year – 2.573 (+ 14.4 basis points)
30-Year – 2.586 (+ 10.3 basis points)
As you can see, it remains a very uniquely shaped yield curve with the 5-Year yielding higher than any other tenor and the 2-Year yielding just slightly higher than the 10-Year.
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