Key Takeaways with Craig
US Equity prices came out of the gate strong after the GDP report showed stronger than expected domestic economic growth. Ultimately, the major indexes wound up slightly higher on the day. Implied volatility in CME’s Equity Index options ticked up slightly.
US Treasury yields were slightly lower through 10 Years and slightly higher at the 30-Year tenor. According to CVOL, implied volatility in CME’s Treasury options hasn’t reacted dramatically this week, but we did notice an interesting move in the skew (in yield terms) in the 2-Year options. As you can see in the CVOL graph below, the skew in the 2-Year is trading near levels last seen in October, 2023. Again, because we’re looking at this in yield terms, this means the options market is pricing in a potential upside move in 2-Year yields, at least relative to the last few months.
In other interest rate news, according to CME’s FedWatch tool, the probability of a 25-basis point cut to the Fed Funds target rate at the March meeting jumped from 40% yesterday to 50% today.
CME Energy markets remained active with Natural Gas futures prices down by about 3.4% and WTI Crude Oil prices up by another 3%. Somewhat quietly, WTI Crude Oil futures prices have risen by almost 10% since the beginning of the year, while CVOL in the options market is trading near 3-month lows.
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