At-a-Glance
Key Takeaways with Craig
US Treasury Yields fell and Equity prices rose immediately after the CPI was released this morning indicating that inflation had fallen from June levels. However, while yields continued lower, the equity market diverged. By late day trading, the E-mini Nasdaq-100 futures price was down by over 2%, the S&P 500 was nearly 1% lower, but the E-mini Russell 2000 was higher by over 3.5%. In the options markets, CVOL in the Treasury options traded lower, but was higher in both the S&P 500 and Nasdaq-100.
Perhaps related to the falling yields, Gold futures prices were up nearly 2% today while Silver was nearly 2.5% higher. CVOL in both Gold and Silver options traded higher, but in Silver options, the skew moved slightly toward the Puts today, while it traded higher (toward the Calls) in the Gold options.
Also, most major currencies were higher relative to the US Dollar as yields fell. Most notably, the Japanese Yen was up nearly 2% versus the US Dollar. CVOL in Japanese Yen options traded higher, while the skew moved substantially toward the Calls. Both of these measures are depicted in the CVOL graph below which shows CVOL in the blue line and skew in the purple line.
Finally, CME’s FedWatch tool reflects a big jump in the probability of a FOMC rate cut at the upcoming meetings. Specifically, the probability of a 25 basis point cut at the September meeting rose from about 70% to about 85% today and the probability that it has cut by 50 basis points at the November meeting rose from about 34% to about 50%.
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