Key Takeaways with Craig
US Equity Index prices fell today after the monthly ADP jobs reports suggested a stronger than expected labor market in the US. Micro 2 and 5 Year Treasury yields rose by about 5 basis points while the longer end of the yield curve was near steady on the day, increasing the amount by which the 2s and 10s are inverted. Fed Funds futures and the CME FedWatch tool reflected a slightly higher probability for a higher Fed Funds target rate over the next few months.
In other CME Group markets, the US Dollar gained relative to most major currencies and Gold prices fell, perhaps also on the prospect of higher interest rates.
Continuing the trend we saw for most of last year, Natural Gas prices remained volatile, falling nearly 10% today. With today’s move, Nat Gas futures for February delivery are down by about 45% versus what we saw just over a month ago. We used QuikStrike data to create the top graph below that depicts prices for the February Nat Gas expiration this year and for the years since 2017. The days until expiration are graphed on the horizontal axis. As the graph shows, with the recent decline in prices, while still high relative to historical norms, Nat Gas prices are currently (red line) lower than they were a year ago and closer to what we’ve seen in the last several years. The bottom graph shows the current Nat Gas CVOL level and reflects that implied volatility in the options has declined with the recent price break (though also remains above historical norms).
This week isn’t over yet though.. tomorrow brings us the Department of Labor December Employment report and we’ll be back reporting on its effect on the market tomorrow afternoon.
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