At-a-Glance
Key Takeaways with Craig
US Equity prices sold off sharply a day after the FOMC raised its target on the Fed Funds rate by 50 basis points and signaled higher interest rates for longer than perhaps was the consensus view. Implied volatility in CME’s Equity Index options rose with the price break but, in the options that expire in 30 days, just to the level it was trading at prior to the CPI release and still below the six month average. This is depicted in the blue line in the QuikStrike graph below (the six-month average represented by the dotted line).
In other CME Group markets:
- The Micro 2-Year Yield was near unchanged on the day while the 10-Year yield was down by about 7 basis points resulting in a 2s versus 10s inversion of about 77 basis points. According to CME’s CVOL tool, volatility in the Treasury options has declined for 6 days in a row. The CVOL level in the Aggregate Treasury (2s, 5s, 10s and 30s) has declined from 170 to 130 since last Wednesday.
- Gold futures prices were down by 1.7% and Silver was down by over 3.5%. Both Gold and Silver CVOL levels are trading near 6 month lows.
- The US Dollar gained versus most major currencies in CME’s FX futures markets with the Aussie Dollar down by over 2.25%. Despite this price volatility, the options implied volatility has continued to decline. In fact, at 8.15, the CVOL in the G5 currency basket is at the lowest level in 6 months and well below the six month average CVOL level of near 12.
So, in a year characterized by volatility, we are still seeing big price moves as we near the last couple of weeks. Have a great night and we’ll see you tomorrow.
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