Key Takeaways with Craig
US Equity prices rallied again today, albeit in a much more moderate fashion as none of the four major indexes were up by 1%. Meanwhile, US Treasury yields reversed some of yesterday’s declines as the Micro 2, 10 and 30-Year Treasury Yield futures contracts were up by between 7 and 9 basis points in mostly a parallel move higher. Implied volatility in CME’s Equity Index options was near steady from yesterday’s close while CVOL in the Treasury options increased, particularly in the 30-Year where it rose by about 7.5%. The 2-Year options continue to trade with a pronounced Put skew, in yield terms, while the 10 and 30-Year options have a neutral to Call skew, as you can see in the CVOL image below.
CME’s FedWatch tool didn’t change dramatically from yesterday though the likelihood of a cut to the Fed Funds target rate at the March meeting declined from about 35% to about 22%. Similarly, the likelihood of a 50 bps cut by the May meeting declined from about 17% to 11%.
Finally, after selling off over the last couple of days, CME Group’s cryptocurrency prices rallied back with Bitcoin futures up by about 6.7% and Ether by about 6.2%. Implied volatility in Bitcoin options is the highest it’s been since early April and the 25 delta calls are trading at vols about 6% higher than the puts.
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