Key Takeaways with Craig
US Equity prices began the day lower, partially recovered throughout the day, but sold off near the cash market close to end broadly lower after a higher than expected PPI number was released this morning. The Nasdaq led the losses, down nearly 2% on the day. US Treasury Yields rose, once again, more at the short end, as the Micro 2-Year Yield future was up by another 8 basis points while the Micro 10-Year was up by about 5.5 basis points, widening that inversion by a couple more basis points. Implied volatility in CME’s Equity Index options markets rose moderately with today’s price break but remains below the 3-month average level.
In CME’s Treasury options markets, the 2-Year and 10-Year volatility and skew diverged slightly today. In the CVOL charts below, the orange line represents the 2-Year and the blue line represents the 10-Year. The top graph shows the CVOL Skew of the treasury yield and, as you can see, in the 10-Year, the Calls were bid slightly over the Puts today, while the opposite was true in the 2-Year. Similarly, the bottom graph depicts the overall CVOL level and shows that 10-Year implied volatility moved slightly higher today while it came down a bit in the 2-Year.
In CME commodity markets, Natural Gas futures prices were down by about 2.75%, Copper futures prices were up by nearly 3% and Palladium futures, which we don’t talk a lot about here in the Key Takeaways column, were up by over 4% today.
Have a nice evening, stay safe on the roads for those of you up here in northern Illinois and we’ll be back tomorrow to recap the week.
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