Treasury Trading Update.

It’s one thing to have an open transparent trading floor with bona fide trades occur and records are kept for spazmodiars like myself to glean through in the wee wee hours. It’s another thing to keep accurate records. Case in point the exchange shows over 30K trade in the Mar. 30yr. 121 calls yesterday, they show a decline in open interest of 8.7K leaving the total at 19.7K. Whats wrong with that picture? I’ll tell you if 30K trade and there is only 27K open interest, it’s possible but unlikely that old longs and shorts liquidated. More likely there was an error reporting how many 121 calls traded. The reason I confidently deduce that is because my man Alex who stands in the pit, let me know that there was a large block trade that involved buying 12K of the June 121 calls vs. selling 12K of the Mar. 121 calls. June 121 calls according the exchange traded 12,590, open interest rose 12,514 and stands at 14,362, that makes sense.

Let’s continue down this path a bit more, now Alex my man told me the calendar spread was quoted in the pit with futures around 118’03 and the locals showed .54/.60. A couple minutes later the trade gets posted as a block, 12K traded @ 1.01, futures still around the same level. We have seen this before where in order to get one price the buyer is willing to give up a substantial sum to an off floor market maker and destroy the integrity of the open outcry market see http://financialfutures.typepad.com/kiss/2009/05/the-cost-of-doing-business-off-the-floor.html.  

Now switch over to the Greek situation for a minute, as everyone is aware cds contracts on Greek debt are exploding or have been up until this a.m.. Stories that there will be an eventual bail out of some sort and interviews with the Greek Finance minister in Davos that “all the skeletons in the cupboard” have been exhumed and are being dealt with seems positive. Spreads via the flight to quality buying have eased a bit for now. But getting back to what’s been going on, does anybody have any idea how many cds contracts are outstanding on Greek debt. Personally I would not be surprised that if you were to measure the notional amount of these cds contracts and compare it to the notional amount of Greek debt that these cds contracts are derived from you could well find there are not twice as many but perhaps 100 or more, which totally exacerbates beyond any sort of reasonable parameter an already bad situation. Add in computer programs that continue to scalp and make trades based on these science fiction contracts and you have a totally artificial market, congratulations 21^st century, fucking outstanding.

So given the occasional screw ups of trying to run an open transparent exchange, and the tedious record keeping involved, well you know where I stand, and you know where Alex stands, and by God we continue to starve, hey but who gives a fuck.

Anyway lets look at some price action, as noted yesterday we did see prices finally break the daily trend line however they did rally back up as program buying related to another spike up in Greece’s cds rates was driving the quality bid. Dealer are also looking for decent extension in the duration indices and that seemed to be driving a bid in the long end. Typically the index related buying continues right up to the close of today’s session, so don’t be to surprised to see prices remain firm. So two fundamental forces to deal with today, initial unwinding of risk averse program related buying, which will put downward pressure on fixed income globally, countered by the month end related buying.

Will plan to hold core short position or add to it on rallies today as a guide line. More later.

Players sheet from Thurdsay listed below.

10yr.
197	Bot	750	H17p	27	11720-20+
287	Bot	2000	J17c	49	11721+-22
287	Bot	3000	H19c	11-12	11721-23
287	Bot	500	H16p	11	11721+-22
287	Bot	500	H16/17p	15	11722+-23
444	Bot	1000	H15/15+/16+p Fly	10	11715-15+
444	Bot	1000	J16c	113	11720-20+
560	Bot	500	M16 Strdl	320	^M11620
660	Bot	2000	H16+p	21	11716-17
660	Bot	2000	M10/14p	29	11719-20
660	Bot	3000	H18+c	20-22	11720+-21+
660	Bot	1000	K+16/H-18p Diag	35	11720-20+
660	Bot	500	J17+c	37	^M11604
660	Bot	500/1000	J+14/-12p 1x2	9	^M11600
684	Bot	3000	H16p	12	11718-18+
685	Bot	500	H18+c	20	^H11722+
714	Bot	2000	M+14/-18 Combo	12	^M11528+
714	Bot	500	H17+ Stdl	123	11720-20+
370	Sold	500	H16/17c	46	11714+-15
370	Sold	5000	H15/19 Strgl	14-15
374	Sold	500	M10p	14-5
560	Sold	500	H17 Strdl	125	11715+-16
660	Sold	500	H17+ Strdl	122	11718+-19+
660	Sold	1000	H18+c	18	11719+-20
684	Sold	2500	H19+c	5	11719-20
684	Sold	500	H16+p	19
714	Sold	1000	H17 Strdl	125	11715+-16
714	Sold	2000	J14p	30	^M11529+-30
714	Sold	1000	J14+/16p	37	^M11528+
714	Sold	1000	J14p	29	^M11600
714	Sold	1000	J14p	28	^H11704
30yr.
287	Bot	500	H13/15p	14	11800-01
287	Bot	5000	H20/22/23c Fly	17-18	11804-05
714	Bot	500	H18 Stdl	222	11804-05
560	Sold	1000	H16c	225	11726-7
660	Sold	500	Expire 1/28   11830p	3	11804-5
2's and 5's
714	Bot	4000	Two Yr J108p	14	^10807.5
825	Bot	1500	Two yr 109.25/109.5c 1x2	1
660	Sold	1000	Two yr J108p	12.5
714	Sold	2000	Two yr 109c	6-6.5
825	Sold	4000	Two Yr J108p	14	^10807.5
Fed fund
287	Bot	500	N68/75/81c Fly	1.25	N9976+-7
287	Bot	1500	J50p	.50	J9983+-4
287	Bot	500	J87p	4	J9984-84+
374	Bot	250	M+68/75p J-50p	Even
560	Bot	500	N68/75/81c Fly	1.5	N9976+-7
560	Bot	1000	M68/75/81p Fly	1.25	M9981+-2
690	Bot	2000	G87c	.50	G9986+-87
709	Bot	100	J50/75p 1x2	.25	J9983+-4
709	Bot	500	M68/75/81p Fly	1.25	M9981+-2
714	Bot	250	M75/81p	1.75	M9981+-2
714	Bot	250	N68/75/81c Fly	1.25	N9977-77+
714	Bot	750	M62/68p	.25	M9981+-2
714	Bot	500	M62/68/75p Fly	.25	M9981+-2
714	Bot	500	K/N 81c Cal	.75
915	Bot	500	G81/87c	5.25	G9986+-87
915	Bot	200	N81c	3.25	N9976-6+
915	Bot	750	N81/87c 1x2	2.5	N9976-6+
915	Bot	500	G81p	.25	G9986+-87
915	Bot	750	K75/81/87c Fly	1.5	K9981+-2
006	Sold	3000	G87c	.50	G9986+-87
287	Sold	500	N68/75/81c Fly	1.25	N9976+-7
287	Sold	100	M81 Strdl	8	M9981+-2
287	Sold	1500	G81/87c	5.25	G9986+-87
709	Sold	1000	G87c	.50	G9986+-87
714	Sold	1000	G87c	.50	G9986+-87
830	Sold	250	K81c	4	K9981+-2
915	Sold	500	G87c	.50	G9986+-87