Key Takeaways with Craig
In a complete reversal of yesterday’s rally, US Equity prices fell sharply and US Treasury yields rose as the market continued to digest the FOMC action and assess the chances of a recession. Unsurprisingly, implied volatility in CME’s Equity Index options markets spiked and is trading near the highest levels we saw during the initial days of the Russian invasion of Ukraine. As you can see from the blue line in the E-mini Nasdaq-100 QuikStrike graph below, the last time implied volatility was this high over the last two years was in the Fall of 2020. Further, as you can see from the orange line, E-mini Nasdaq-100 prices have given up all of the gains since March, 2021.
According to the Micro US Treasury Yield futures prices at CME, yields rose throughout the curve and in another steepening move as the 2-Year was up by about 6.5 basis points and the 10 and 30-Year were up by 11 and 12 basis points respectively. That move puts the price of the Micro 10-Year at nearly 3.05. The difference between the Micro 2 and 10 Year Yields has widened back out to about 23 basis points.
CME FX futures prices saw notable moves as well as the US Dollar strengthened versus most major currencies again. Implied volatility in CME Group FX options markets is also trading at elevated levels.
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