At-a-Glance
Key Takeaways with Craig
US Equity Index prices sold off sharply as trading began after Labor Day marked the “unofficial” end to summer yesterday here in the US. The Nasdaq-100 and Russell 2000 led losses as both were down by about 3% on the day, while the S&P 500 was down by about 2%. Somewhat unsurprisingly, implied volatility in CME’s Equity Index options spiked today, with E-mini Nasdaq-100 vol rising from about 16.7% to nearly 21% today.
US Treasury yields fell today, with the 2-Year Treasury yield future falling by about 3 basis points and the 10-Year falling by about 7. Even after today’s move, the 10-Year Yield future is trading about 5 basis points above the 2-Year, as the curve has returned to a “normal” shape at those two maturities. The top image below shows 10-Year Yield futures price minus that of the 2-Year since June, 2022 and, as you can see, shows that the curve has been inverted since then and as deep as about 100 basis points. CVOL in CME’s Treasury options also traded higher and, while not as high as the spike we saw at the beginning of August, remains well above the 1-year average. CME’s FedWatch tool reflects a slightly higher probability (37% vs 30%) of a 50 basis point cut at the September 18th meeting than it did at the close on Friday.
Finally, WTI Crude Oil futures prices traded down to about $70 per barrel today, the lowest price we’ve seen since December of last year. CVOL in the WTI Crude Oil options rose today and is trading just above the one-year average, while the Puts have gained relative to the Calls lately, as you can see in the lower image below that depicts the WTI Crude Oil options skew.
Of course, the market will be watching for Friday’s August Employment situation report, among other economic releases this week, for the latest indication of the health of the US job market.
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