Key Takeaways with Craig
US Equity prices began the day in positive territory, then spend most of the day lower, but rallied late in the day to end up near steady to slightly lower. US Treasury yields continue to steal headlines as rates were up throughout the yield curve. Today, however, the long end of the curve was up relatively more than the short end, leading to a reduction in the inversion of the 2s versus 10s. According to CME’s Micro Treasury Yield contracts, the Micro 2-Year was near steady on the day while the 10-Year was up by about 8.5 basis points. This brings the inversion down to about 35 basis points.
In other CME Group markets, WTI Crude Oil futures prices were up by about 2.7% but remains below $80.00 per barrel while RBOB Gasoline futures were up by nearly 4%.
Given all the Treasury price action, we took a look at the volatility in CME’s Treasury Options products. Remember, these are options on CME’s traditional Treasury products which are quoted in price, not yield, like the Micro products we reference here often. Like we did yesterday for the British Pound, we went all the way back to the beginning of 2007 to graph price and volatility in CME’s 10-Year Treasury futures and options. As you can see from the orange line, the 10-Year price hasn’t been this low (remember, price and yields move inversely to one another) since 2007 and the implied volatility in the 10-Year options hasn’t been this high save for during the beginning months of the COVID-10 pandemic in early 2020 and during the financial crisis in 2008 and into 2009.
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