Key Takeaways with Craig
The US Stock market fluctuated wildly today as it was higher in the morning, initially moved higher after the FOMC announcement of a 75 basis point hike to its Fed Funds target rate, then fell as Fed Chairman Jerome Powell began speaking but rallied again to end broadly higher. Ultimately, the major US Equity indexes were up by between 1 and 2.5% while implied volatility declined sharply in CME’s Equity Index options markets.
US Treasury yields moved lower after the announcement and the Chairman’s press conference, down across the yield curve by about 16 basis points (though the 30-Year was down by only about 7.5 basis points) according to CME’s Micro Treasury Yield futures contracts. The Micro 10-Year Yield futures is yielding about 4-5 basis points more than the 2-Year, but the entire Treasury yield curve is very flat relative to historic norms. We used CME’s Micro Treasury Futures contract to graph the yield curve from 2 Years out through 30 Years in the image below. The orange line represents the settlement price of each of the four Micro Treasury futures contracts on January 3rd of this year; the blue line represents today’s levels. We thought it was a great representation, not only of how flat the Treasury yield curve has become but also how much higher interest rates have moved over the last 5 months.
In other CME markets, WTI Crude Oil prices fell by about 2.5%, Gold prices rose and the US Dollar fell versus most major currencies.
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