Key Takeaways with Craig
US Equity Index prices struggled to find a clear direction for most of the day but, after a late afternoon sell-off, ended broadly lower. The reaction didn’t come immediately after the FOMC meeting minutes were released but the Dow, Nasdaq and Russell 2000 all wound up lower by at least 1%, while the S&P 500 saw about a .75% decline. Implied volatility in CME’s E-mini Nasdaq-100 and S&P 500 options markets continued higher and is trading near the 6 month average closing level, a time period that includes the volatility in March that was induced by Silicon Valley Bank failure.
US Treasury yields traded around the flatline for most of the day, but later in the afternoon, rallied with the Micro 10 and 30-Year Yield futures up by about 5 basis points and the 2-Year up by about 3.5. Meanwhile, the using CME’s FedWatch tool as a proxy, the Fed Funds futures were little changed, as the probability for rate moves through the rest of 2023 remained about the same as yesterday. CVOL levels in CME’s Treasury options declined during the morning, rose heading into the FOMC minutes release, fell immediately after but then rose to earlier morning highs by 3 PM Central time. The graph below shows the CVOL change in CME’s 10-Year options throughout the day.
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