At-a-Glance
Key Takeaways with Craig
US Equity prices spent most of the day solidly in the red, but improved throughout the day to wind up lower, but off the day’s lowest levels. Meanwhile, the 2-Year Treasury Yield future was down slightly while the 10-Year was a couple basis points higher. All of this came ahead of tomorrow’s release of the PCE, which is widely regarded as the Fed’s preferred measure of domestic inflation.
Somewhat interestingly, CVOL in CME’s 2-Year Note options increased significantly, while that in the other tenors was little changed, as you can see in the excerpt from the CVOL tool on the right side of the image below. Perhaps this is a reflection of the market-moving potential of the PCE number release at the short end of the yield curve. Also, the top image on the left side depicts the skew in the 2-Year Treasury options in yield terms while the bottom image depicts the convexity. Remember, the skew reflects the relative volatility of the Call versus the Puts and the convexity measures the volatility of the out of the money options versus that of the at the money. As you can see, the skew reflects an increase in Put value relative to Calls in yield terms, while the convexity indicates the volatility in the 2-Year options is higher “on the wings”.
It is also worth noting that Gold futures were up another 1.5% today and are trading at all-time highs.
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