Key Takeaways with Craig
US Equities sold off today and Treasury yields climbed higher, particularly at the longer end of the yield curve. Specifically,
- E-mini Nasdaq-100 futures prices were down by about 2.5%
- E-mini S&P 500 futures prices were down by about 1.4%
- Micro 10-Year Yield futures were up by nearly 11 basis points
- Micro 2-Year Yield futures were up by about 6 basis points.
Implied volatility in CME’s Equity Index and Treasury options markets traded higher today and the skew, as measured by the 25 delta risk reversal, indicated that the Puts in the E-mini S&P 500 were bid relative to the Calls.
Commodity markets were active at CME today as well as Gold and WTI Crude Oil prices traded higher. WTI Crude Oil options reacted as well as the CVOL level jumped from 44.55 to over 51; a relative increase of 15%.
Regular readers of the Key Takeaways column know that we’ve spent a lot of time discussing the Treasury Yield curve over the last couple of years as it inverted and as yields have risen to 15+ year highs. Today we’ve included a graphical representation of what we mean when we talk about the “shape” of the yield curve. Using CME Micro Treasury Futures data, we’ve graphed the US Treasury yield curve on four different dates since October, 2021.
- 10/8/2021 – the blue line in the graph represents a “normal” yield curve wherein the further maturities yield more than the shorter dated maturities. You can also see how much lower yields were throughout the entire curve just over 2 years ago.
- 7/5/2022 – the orange line represents approximately the day on which the 2s and 10s inverted and have stayed inverted through today. As you can see the 10s are slightly higher than the 2s, though the 30-Year remains above the 2s. It is also a very “flat” yield curve without much of a difference between any of the four maturities.
- 3/8/2023 – The gray line represents the day on which we saw one of the deepest inversions between the 2s and 10s of nearly 100 basis points.
- Today – The yellow line represents the shape of today’s yield curve. As you can see, it is still inverted but has become pretty “flat” again. Again, since we used the same scale for each date, the graph does a nice job of illustrating just how much higher yields were than they were about two years ago.
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