Key Takeaways with Craig

US Equity prices traded mixed again today with the Dow Jones Industrials gaining about .7% and the Nasdaq losing about .2%.  These moves came after an upward revision in Q1 GDP was announced this morning.  Implied volatility in CME’s Equity Index options was little changed on the day and continues to trade a relatively low levels compared to the last few months. 

US Treasury yields stole the show today, jumping higher after the GDP announcement.  CME’s Micro 2-Year Treasury Yield was trading 15 basis points higher than it was yesterday while the Micro 10-Year was up by a similar, 14.5 bps.  The inversion between the two remains at over 100 basis points and, to be precise, 102 basis points at the time of this writing.  This represents the deepest the inversion has been since the 2s began yielding more than the 10s almost a year ago.  CVOL levels rose with today’s price move but remain below the 3-month average.

CME’s FedWatch tool now shows a 32% chance that the Fed Funds target rate will be 50 basis points higher than it is currently and a 5% chance that it will be 75 basis points higher at the end of the year.  This is up from 22% and 2.5% respectively. 

Lately we’ve written about the relatively low levels of implied volatility in several of CME’s markets.  CME Gold options are now trading at the lowest CVOL level since Valentine’s Day, 2020.  To put that in some historical perspective, that was almost a month before the World Health Organization declared COVID-19 a pandemic.  The CVOL graph below illustrates this relatively low vol level in Gold options. 

Today's Future Price Action

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