Key Takeaways with Craig
Once again, US Equity prices struggled to find a clear direction during much of the trading day, but rallied near the close to end broadly higher. The Nasdaq, which has generally been more sensitive to increases in interest rates over the past several months, led the gains among the four major US indexes, as US Treasury yields fell again today. While the Micro US Treasury Yield futures contracts reflected lower yields by between 4.5 and 9 basis points (depending on the maturity), yields were much lower earlier in the trading session. The US Treasury Yield curve remains very flat with the 10-Year yielding just about 3.5 basis points more than the 2-Year, at least according to CME’s Micro Treasury futures prices.
We will keep our focus on CME’s Energy markets, which remain active. WTI Crude Oil futures prices were down by another 2% today and Natural Gas prices, about which we’ve written extensively here in the Key Takeaways section over the last several months, were down by another approximately 9%. Natural Gas prices are now down by about 35% from early June high levels and implied volatility (“vol”) in the options has declined from over 90% to its current level of about 65%. To show how historically high Nat Gas prices and volatility were, we used QuikStrike data to graph the Nat Gas August expiration price and vol from 2016 through present. The red line in each graph represents the 2022 levels with the Days until expiration on the horizontal axis. As you can clearly see, even after the sharp declines in both price and vol, price is still significantly higher than it has been at this time in any year since 2016 and only in 2020 was volatility at these levels.
Enjoy your Thursday evening and we’ll be back tomorrow to wrap up the week!
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