Key Takeaways with Craig
US Equity prices were modestly higher as we slide into the second half of May. On a day largely devoid of major market moving headlines, the Dow Jones Industrials were little changed, the Nasdaq was up by about .5% and the small-cap Russell 2000 led gains, up by nearly 1.25%. US Treasury yields were also up slightly with the Micro 2-Year Yield future gaining less than 2 basis points (“bps”) and the Micro 10-Year up by about 4 bps. Implied volatility in CME’s Equity Index options was little changed, though in the Treasury options, vol was up by about 5% over Friday’s close according to the aggregate Treasury CVOL index as the market continues to watch for any indications about the progress of the debt ceiling negotiations.
However, despite the uncertainty surrounding the debt ceiling, CME’s FX options are trading at the lowest CVOL level we’ve seen since February, 2022. The CVOL graph below depicts the G5 FX CVOL over the last two years (remember, the G5 CVOL takes into account the volatility in the Euro FX, Pound, Japanese Yen, Aussie and Canadian Dollar options). We drew the yellow line on the graph to illustrate the last time CVOL traded this low.
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