At-a-Glance
Key Takeaways with Craig
US Equity Index prices shot higher and Treasury yields fell sharply a day after the FOMC announced it was leaving its Fed Funds target rate unchanged. All four major US Indexes were higher, this time led by the small-cap Russell 2000, which was up by over 2.5%. Somewhat unsurprisingly, given the strong price rally, implied volatility in CME Equity Index options fell, as both the E-mini S&P 500 and Nasdaq-100 are now trading below the 30-day implied volatility 3-month closing average.
The US Treasury yield decline came at the longer end of the curve with the Micro 10-Year Yield future falling by almost 12 basis points (bps) and the 30-Year declining by about 14.5 bps. However, the Micro 2-Year Treasury was near steady on the day, widening the inversion between the 2s and 10s back to about 27 basis points. CME’s FedWatch tool reflects little change from yesterday with respect to the December FOMC meeting.
Perhaps related to the declining yields, the most major currencies gained relative to the US Dollar in CME’s FX futures market. The Canadian Dollar futures price was up by 1%, and the Aussie Dollar and Euro FX were higher by about .7%. CVOL levels in the G5 aggregate index declined with the price move but the skew shifted toward the Calls. While it is still trading with a slightly negative skew, you can see from the CVOL graph below that it near the three-month high, indicating Calls are trading at implied volatility levels as close to the Puts as they have in 3 months.
Remember, tomorrow brings us the release of the October Employment Situation report and we’ll be back reporting on the markets tomorrow afternoon.
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