Key Takeaways with Craig

US Equity Indexes were modestly lower today as the market looks toward several central bank meetings this week, including the conclusion of the US FOMC meeting tomorrow afternoon.  In addition to that announcement, the Bank of England announcement is scheduled for 7:00 AM Eastern time on Thursday and the Bank of Japan for 10:30 PM Eastern time Thursday.  Given these announcements, along with other global economic number releases, it is not surprising that CME’s Equity Index options that expire over the next few days are trading at significantly higher implied volatility levels than the more deferred expiries.  The top QuikStrike graph below provides a nice illustration of this. 

US Treasury yields were higher today with the Micro 2-Year Treasury yield future up by about 4 basis points and the Micro 10-Year yield up by nearly 5 bps.  With this move, the Micro 2-Year is trading at 5.058% and the corresponding on-the-run cash 2-Year is nearing the highest yield since mid-2007 before the economic disruption called the “financial crisis” that was brought on by mortgage defaults.    Interestingly, and as we’ve written about several times here in the Key Takeaways column, the 2-Year Treasury options, in yield terms, continue to trade with (an even more pronounced) Put skew while the 10 and 30-Year options are trading with a Call skew.  We’ve illustrated this in the bottom CVOL graph below. 

It was a relatively quiet day in CME’s commodity products as WTI Crude Oil, Gold, Corn and Soybean futures prices were little changed on the day.

Today's Future Price Action

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