Key Takeaways with Craig

US Equity prices struggled to find a clear direction today and ultimately wound up little changed.  Somewhat unsurprisingly, implied volatility in CME’s Equity Index options was little changed on the day as well.  US Treasury yields were lower on the long end of the curve but higher on the 2-Year; we’ll cover this in a bit more detail below.

Other notable price moves in CME markets included the grains futures where soybean prices were down by 4%, Corn was down by about 1.5% and Wheat was down by about 1%.  And staying on the commodities theme, WTI Crude Oil futures prices were down by 5% today.  With the break in prices, we saw implied volatility spike from about 44% to over 52% in the options that have 30 days  until expiration.  We also saw the out of the money Puts gain relative to the Calls in today’s trading. 

As we mentioned earlier, the US Yield Curve became “more inverted” with respect to the 2-Year and 10-Year yields today.  According to the Micro Treasury Yield contracts at CME Group, the 2-Year yield rose by about 3 basis points while the 10-Year fell by about 9 basis points.  The difference between the two is now at a recent high of about 30 basis points.  We used CME Group settlement data to illustrate this in two different ways below.  The upper picture simply shows the settlement price of both futures contracts going back to January.  As you can see, the 2-Year briefly traded above the 10-Year in April but quickly normalized.  However, these two points have been inverted since the beginning of July and the difference is as large as its been since January.  The lower graph depicts the same phenomenon but in a different way.  We’ve simply subtracted the Micro 2-Year Yield settlement price from the 10-Year such that any reading below zero would indicate an inversion.  

Today's Future Price Action

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