Treasury Trading Update.

The discount rate move  is “radical” mainly because the Fed has not chosen to make an inter meeting move in quite a while. It means the speculation on the timing of raising the

more relevant overnight rate is going to be sooner, rather than later. Forget all the soft soap that Fed officials are effusing, it’s their latest technique to start draining several universes’s of liquidity without creating a black hole.

Yesterday market hit big selling volume when prices broke a Head & Shoulders neckline on the Daily charts (see chart below). The level of 11716.5 (versus the Mar. 10yr. future) was a level for many longs to cling to as the last support, volume surged when it was penetrated. Open interest fell 30K in the Mar. futures yesterday, but note that June picked up 25K, so the net decline was 5K. Still the last few sessions have been on declining open interest. Prices held 11702.5 which was around 3.80% on the cash 10yr., and after the rate increase they pushed to 116’31, currently with about 3 hours till the US session begins, prices on the Mar. 10’s are trading 117’05. The main reaction is Equity markets selling off and the dollar rallying sharpley.

I have been advertising selling calls and buying puts, and I would turn the heat up on that trade. June futures now look to head towards 114’20 area, based on projections form Head & Shoulder top. The neck line vs the June futures is around 116’04 area, so any rallies to there should be sold, meaning 116.5 calls are for sale, and more aggressively 116 calls are for sale. (See disclaimer) April, May, and June options are all exercisable against the June futures. On the down side saw some cheap put flys being put on vs. the April, and I would look at those.

Again June futures will be the front month one weak from today. There will be heavy flow from Mar. futures into June up until then. March options expire today.

Check out flows in 30's and 10's from yesterday, I like the April put structures for 8 tics...

30yr.
House	Buy/Sell	Quantity	Strike	Price	Futures
287	Bot	500	H17p	62	^H11604
006	Sold	500	H16/17p 1x2	20	11605-06
287	Sold	1500	H15p/17c Stgl	11	11604-05
560	Sold	1000	H19p Covered 1x1	200-01	^H11700
560	Sold	2000	H15p/17c Stgl	9-10	11602-03
690	Sold	1000	11600p  Exp. 2/18	2	11618-19
690	Sold	1000	11720c  Exp. 2/18	34	11700-01
830	Sold	2000	M+07/08/09p Fly M-15p	55	11605-06
10yr.
197	Bot	30000	M23c	5	11719+-20+
275	Bot	500	J19c	5	11703+-04
355	Bot	5000	J14p/19c Stgl	21	11722-22+
505	Bot	2000	J14+/16p 1x2	11	11726+-27
560	Bot	500	M14+/16p Stupid	210	11725+-26
560	Bot	2500	H16+p	2	11721-21+
560	Bot	1000	H17p	12	11702+-03
660	Bot	10000	J13+/14+/15+p Fly	9	11717-18
660	Bot	500	H17+/18c	18	^H11709
660	Bot	1500	M20+c	13	11706-06+
660	Bot	500	K+/H-17c Cal	20	11707-07+
660	Bot	500	J16+c	37	^M11525
685	Bot	1000	J16p	49	11724+-25
685	Bot	500	M16 Stdl	303	^M11524
685	Bot	1000	H-16p/+18c Combo	1	^H11707/^H11708
685	Bot	500	K16 Stdl	227	^M11524
714	Bot	7500	H17+/18+c	16-18	11716-17
714	Bot	1000	K14p/19c Stgl	47	11707-08
714	Bot	5000	H17+/18+c	7	11705+-06+
737	Bot	5000	J13/14/15p Tree	8	11717-17+
830	Bot	2000	M+12+p/-20c Combo	5	^M11616
287	Sold	1000	H17p	8	11710-10+
323	Sold	500	K12+/14p 1x2 K19/20+c 1x2	6	11708-09
370	Sold	2500	K14p/19c Stgl	47	11707-08
560	Sold	1000	M+12p/-20c Combo	Even	11724-24+
560	Sold	2000	J13/14/15p Tree	8	11707-08
660	Sold	6000	J14p/19c Stgl	21	11717-18
685	Sold	1000	M16+ Stdl	302	^M11609
685	Sold	1000	J16+ Stdl	152	^M11611
685	Sold	2000	H16/17p	10	11705+-06
685	Sold	1000	M16 Stdl	303	^M11524
714	Sold	1000	H+17+/J-16+c Diag	26	11718-21
714	Sold	1000	H17+ Stdl	32	11716-16+
737	Sold	500	M14/14+/15+p Fly	13	11724-24+
Local	Trade	500	H17/17+p	10	^H11716