Treasury Trading Update.

For a “thin” holiday market open interest rose significantly in the Feb. options. Over all volume in 10yr. note futures for the Mar. contract was well below the average, about 544K contracts traded. Open interest in the Feb. puts rose 28K to 188K, most of that coming from shorts entering the 115/119 strangle. The 115 puts traded around 30K and the 119 calls traded around 30K. However,  it was not all selling as noted yesterday, Mann likely for a European based fund was buying puts outright in the 115, 115.5, and 116 strikes in both Feb. and Mar. The Mar. 115.5 puts traded over 24K yesterday with open interest rising over 15K on preliminary reports. China was very vociferous about being able to double it’s purchases in treasury debt this coming year and this added to pressure on bonds. Next weeks auctions could be a harbinger of how next year will be playing out with Treasury borrowing needs increasing so much that serious funding gaps of several hundred billion dollars are being discussed. Given the  amount of debt maturing this year, 2 trillion and the amount approved for new spending 2 trillion means the Gov't will have to borrow $80bln./ week.