Key Takeaways with Craig

Due to vacation schedules, we’re writing today’s edition of In FOCUS during late morning trading so conditions could change, but here’s how your Thursday started.  US Equity prices were lower and Treasury yields were sharply higher after the ADP report on payrolls suggested a stronger than expected jobs market.  The Dow, S&P 500 and Nasdaq were all down by between 1 and 1.25%, while the Russell 2000 was lower by over 2% at the time of this writing.  Somewhat unsurprisingly, implied volatility jumped in CME’s Equity Index options with 30-day vol in the E-mini S&P 500 options rising from about 10% to about 13.5% since Friday. 

CME’s Micro 2-Year Treasury Yield future was higher by about 10 basis points, but earlier in the day was up over 15 bps and trading above 5%.  The Micro 10-Year Treasury Yield was also higher by about 10 bps but off of earlier high levels.  Implied volatility in CME’s Treasury options also moved sharply higher as you can see in the CVOL levels in the top chart below (10-Year in blue and the 2-Year in orange). In addition to the higher vols as represented by CVOL in the top graph, we also saw a slight shift in skew in the 10-Year options toward the Calls.  The lower graph shows that the 10-Year (blue line) is now trading with a slight Call skew, while the 2-Year still has a slight skew to the Puts, in a bit of a divergence between the two. 

Tomorrow will bring us the Department of Labor Employment Situation report for June which will provide another reading on the health of the US Job market.  We’ll be back then to recap tomorrow’s and the first week of July’s market action. 

Today's Future Price Action

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