Key Takeaways with Craig

US Equities rallied this afternoon to close broadly higher as we begin the second half of June.  The Nasdaq led the gains, up by about 1.25% while the S&P 500 was about .75% higher.  Implied volatility in CME’s Equity Index options markets ticked higher, even with the price rally, but off of relatively low levels. 

After falling last week, US Treasury Yields rose, as the 2-Year Treasury Yield future was up by about 5 basis points and the 10-Year was up by about 6.5.  CVOL in CME’s Treasury options fell slightly, though we did see the 2 and 10-Year skew diverge a bit today.  In the 10-Year, in yield terms, the skew moved slightly toward the Calls, while it continued lower in the Puts. 

After last week’s CPI and PPI releases, the FOMC meeting decision and falling Treasury yields, we checked in on CME’s FedWatch tool to see what the Fed Funds futures market was saying about interest rate expectations.  As you can see in excerpt from that tool below, the market continues to price in a 56.7% probability that the Fed cuts its target rate by 25 basis points as of the September meeting and a ~5% chance that the target rate is 50 basis points lower by that meeting; both of those are lower than they were on Friday after today’s uptick in Treasury yields and decline in Fed Funds futures prices, which move inversely to yields. 

In other CME markets, Gold futures prices declined by about .5%, WTI Crude Oil futures prices rose, and are approaching $80/barrel and CME’s grains futures prices were mostly lower.  With respect to the options, CVOL in the WTI Crude Oil options was down slightly and remains at multi-year lows, while that in the Ag options rallied today.  

Today's Future Price Action

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