Key Takeaways with Craig

After a rally to begin the week yesterday, US Equity Indexes sold off today following the Moody’s credit rating agency downgrade of several US-based banks, though they closed above the levels we saw earlier in the day.  Implied volatility increased in CME’s Equity Index options and is trading near levels last seen in late May. 

US Treasury yields were steady at the front end of the curve but declined at the longer end.  The Micro 2-Year Treasury yield future was near unchanged on the day but the 10 and 30-Year futures were down by nearly 6 basis points, which widened the inversion between the 2s and 10s to about 66 basis points. CVOL levels rose in all tenors in CME Treasury options and, in the 10 and 30-Year options, is trading near 1-month highs. 

On Thursday, the market will get the latest reading on consumer price inflation in the US when the CPI is released at 7:30 AM Chicago time.  This will be one of two inflation readings prior to the next FOMC meeting that is scheduled to conclude on September 20th.  The market moving potential is reflected in CME’s E-mini S&P 500 and Nasdaq-100 option volatility curves as you can see below.  As you can see, in both options markets, the options that expire on Thursday after the CPI release are trading at significantly higher vol levels than the options that expire tomorrow and Friday.  In fact, CME’s Event Volatility Calculator suggests that the option markets are pricing in a 26 point move in the E-mini S&P 500 futures and a 123 point move in the E-mini Nasdaq-100 futures price attributable to the CPI release.  

Today's Future Price Action

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