Key Takeaways with Craig

US Equity Index prices fell after the GDP report this morning reflected slower than anticipated growth but with increased prices.  US Treasury yields rose, with CME’s 2-Year Treasury Yield future up by about 5.5 basis points and the 10-Year up by about 5.  CME’s Fed Funds futures also reacted to this news, as reflected in the FedWatch tool which shows the chance of no cut to the Fed Funds target rate by the September FOMC meeting rose from 30% yesterday to 41% today.  Unsurprisingly, implied volatility in CME’s Equity Index options and CVOL in the Treasury options both traded higher today.

In other news, most major currencies traded higher versus the US Dollar with the notable exception of the Japanese Yen.  In fact, with today’s move lower, the Yen is at the lowest level, relative to the US Dollar than it’s been in over 3 decades.  The top CVOL graph in the image below shows the last 10 years of Yen/USD futures prices.  While volatility (CVOL) is generally higher in the Yen relative to the other major currency options, it is in the convexity measure that the Yen stands out.  The CVOL graph below shows the convexity of the Yen in the green line along with that of the Euro FX, Pound and the Aussie and Canadian dollars.  As is evident in the picture, the out of the money strikes are trading much higher relative to the at the money strikes in the Yen than they are in the other four major currencies. 

Have a great evening and we’ll be back tomorrow to report on the end of another volatile week. 


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