Key Takeaways with Craig

US Equity prices were mostly higher to begin the last full week of July trading with the Dow Jones Industrials leading the way, up by about .5%.  Despite the price rally, implied volatility in CME’s Equity Index options markets ticked higher, ahead of Wednesday’s conclusion of the July FOMC meeting.  CME’s FedWatch tool continues to price in a 25 basis point increase to the Fed Funds target rate at this week’s meeting. 

US Treasury yields also moved higher, particularly in the short end of the curve where the Micro 2-Year Treasury Yield was up by over 6 basis points.  The Micro 10-Year Yield futures contract was up by about 3 basis points, which brings the inversion to nearly 100 basis points and approaching its deepest level since the 2s began yielding more than the 10s. 

As they did much of last week, CME grains futures prices stole the show again today.  September Wheat futures prices rose 60 cents per bushel, which was the limit price move (by rule, the price could not trade higher than that) and Corn futures prices were up by over 6%.  Unsurprisingly, the options market reacted to this price move with a jump in CVOL levels.  As you can see in the top chart below, CVOL in Wheat Options is nearly as high as it’s been since at least October, 2018, save for the spike during the initial Russian invasion of Ukraine.  The lower graph shows that Corn CVOL has also risen and is approaching 2-year highs, again, save for the spike in March of last year.  We didn’t graph it, but the skew in both options markets has continued to shift toward the Calls. 

Finally, and somewhat quietly, WTI Crude Oil futures prices have risen nearly $79 per barrel; a level we last saw in the beginning of April.  CVOL, on the other hand, though up a bit today, is trading at near 1-year lows in the WTI Crude options market.

Today's Future Price Action

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