Key Takeaways with Craig
US Equity prices struggled to find a strong direction today but wound up mostly higher a day after the FOMC raised its target Fed Funds rate by another 25 basis points. Despite an increase in prices in the E-mini S&P 500 of about .5% and in the Nasdaq-100 of about 1.25%, implied volatility increased in the options markets; oftentimes, we see a decline in vol associated with price rallies.
US Treasury yields were little changed early, but fell throughout the trading day, particularly at the short end of the curve where the Micro 2-Year Yield future was down by over 20 basis points (bps). The Micro 10-Year Yield was down by about 11 bps, which brings the magnitude of the inversion between the two down to about 35 bps. This is the smallest the difference between the 2 and 10 Year yields has been since October of last year and is down from about 100 bps just about a couple of weeks ago.
Gold futures prices, which have been particularly active lately, were up by over 2.5% today to over $2,000 per ounce; levels we last saw about one year ago. Implied volatility remains elevated in CME’s Gold Options markets as well with the CVOL level just about as high as we’ve seen it since July, 2022. The top CVOL graph below depicts the last 2 years of price and CVOL in Gold and Gold options. Additionally, with the recent rally in Gold prices, we’ve also seen a shift in the options skew. The lower CVOL graph shows the skew in the Gold options over the last two years and shows a clear shift toward the Calls versus the Puts over the last couple weeks as the futures price has risen.
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