Key Takeaways with Craig

For the first time in a while, all four major US Equity Indexes closed lower today, but closed off the lowest levels of the day.  Ultimately, the Dow and S&P 500 were lower by about .6% but the Nasdaq only lost about .2%.  The options market reacted more materially with implied volatility in CME’s E-mini Nasdaq-100 and S&P 500 rising from near the low end of a one standard deviation move to near the 3-month average closing level, using at the money, 30-day vol as the proxy. 

US Treasuries Yields rose today with the Micro 10-Year Treasury Yield future gaining over 15 basis points while the Micro 2-Year Yield rose by about 10, slightly narrowing the inversion between the two which had been near 100 bps. CME’s Treasury options market reacted as follows:

-        10-Year CVOL rose from about 118 to 134

-        10-Year Skew (yield) rose from -2.6 to +11.3, meaning that the skew shifted from Puts to Calls

-        10-Year Convexity rose from 1.04 to 1.07 meaning the out of the money options were bid relative to the at the money or, in other words, the “wings” were bid up. 

These three CVOL graphs are featured below. 

In other CME markets, Gold futures prices fell by over 1% and the US Dollar gained relative to most major currencies in the FX futures markets, both perhaps correlated with the rise in US Treasury yields. 

Finally, CME’s FedWatch tool is pricing in no further changes to the Fed Funds target rate through the end of 2023.  

Today's Future Price Action

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