Key Takeaways with Craig
US Stocks prices broke this week’s short, but sharp, winning streak, though 3 of the 4 major indexes were down by less than 1% (the Russell 2000 led losses, down by over 1.5%). Implied volatility was near steady in CME’s Equity Index options. US Treasury yields jumped and, perhaps related, most major FX currencies were down relative to the US Dollar and Gold and Silver futures prices fell by more than 1%.
Once again using the Micro Treasury Yield futures as a proxy, we saw these approximate yield increases today:
2-Year: +12 basis points
5-Year: +15.5 basis points
10-Year: +13.5 basis points
30-Year: +10 basis points
The 2s versus 10s inversion is trading at about 41 basis points.
CME’s CVOL tool paints an interesting picture in the 10-Year Treasury Note options market. Perhaps unsurprisingly, the overall volatility level jumped with the fairly sharp increase in yields, as shown by the blue line in the graph below. However, looking at volatility skew in terms of yield, as the purple line in the graph below illustrates, we see the skew line decline at around 1:15 today, which essentially would indicate an increase in the value of Puts on yield versus Calls.
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