Key Takeaways with Craig

US Equity Index prices declined by over 1% today while volatility in CME’s Equity Index options rose.  With today’s move, 30-Day implied volatility in both the E-mini S&P 500 and Nasdaq-100 options is now trading above a 1 standard deviation move based on the last 3 months. 

US Treasury Yields diverged again with the Micro 2-Year Yield future down by about 2 basis points (bps) and the Micro 10 and 30-Year Yield futures up by about 3.5 bps.  We also noticed that CVOL in the 2-Year Treasury options declined while vol in the longer-dated maturities increased today.  Given that, we took a look at the CVOL levels of the 2s, 10s and 30s since the beginning of 2022 when the Fed began raising its Fed Funds target rate.  As you can see from the green line in the lower CVOL graph below, volatility in the 2-Year Treasury has been consistently above that of the 10s and 30s (with a couple of brief exceptions) since the first rate increases were made but have somewhat converged recently.

In contrast, the top two graphs depict CVOL levels during times when the Fed had cut rates to near zero and was largely considered “on hold”.  The first time period was following the “financial crisis” from 2013 through the Fall of 2015 and the second was following the COVID-19-induced economic shutdown after March, 2020.  As you can see from those graphs, during those time periods, CVOL levels in the 10s and 30s was consistently higher than that of the 2-Years.  

Today's Future Price Action

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