Ø Heavy auction schedule this week.
Ø Open interest will flow heavily into June contracts this week.
Ø All options vs. the June futures now as Mar. expired Friday.
One bearish element that is missing from the current down move is increasing open interest. Friday’s session saw 91K liquidated in Mar. futures. June futures gained 37K for a net decline over all of 51K. On Feb. 5 with futures prices at the recent high of 118’31.5
Open interest in Mar. futures was 1,428,457, June had 2,567. After Fridays session open interest in the Mar. futures stands at 1,237,137 and June has risen to 111,702. Both contracts combined show a decline of 99K since prices topped on the 5th. Colleagues have pointed out a lot steepening trades have been liquidated and the curve has flattened a bit since the fed raised the discount rate. In the short end the red gold pack spread narrowed by 8 basis points after Thursday and the 2’s – 10’s treasury yield curve spread narrowed to 286 from 293.
Dailey chart below shows price action remains bearish with prices still poised to trade lower. Hourly charts still looking like a 3rd phase lower in current wave structure is in the cards, (see Fridays report with chart outlining possible phases). See disclaimer.
Market will be tested with over $120 billion in Debt auctions this week, starting today with a 30yr. TIP auction followed by 2, 5, and 7yr securities the rest of the week. This will be heavy net new issuance, and this may keep pressure on prices going into the last trading day of February. At that time I will be looking for some buying to come in, but who knows where we will be Friday morning. Odds are lower than current levels, so stay tuned.
Trading flows in 10yr. options from Fridays session courtesy of Geocities.
| 197 | Bot | 1500 | H17+c | 2 | 11703-03+ |
| 287 | Bot | 500 | M14p/19c Stgl | 51 | 11730-31 |
| 350 | Bot | 1000 | M10/13p | 27 | 11630-31 |
| 350 | Bot | 2000 | J12/14p | 16 | 11630-30+ |
| 374 | Bot | 2000 | K17+/19+/21+p Fly | 16 | 11702-06 |
| 660 | Bot | 3500 | H17p | 8 | ^H11700 |
| 685 | Bot | 1250 | M16+c | 103 | ^M11519 |
| 685 | Bot | 1000 | M18c | 36 | 11702-02+ |
| 685 | Bot | 500 | M16+c | 102 | ^M11519/^M11519+ |
| 714 | Bot | 500 | H17p | 7 | ^H11705+ |
| 737 | Bot | 1000 | M14+/16P Stupid | 239 | `11703-05 |
| 830 | Bot | 1000 | J16+/17+/18c Tree | 8 | 11702+-03 |
| 197 | Sold | 1000 | J16c | 49 | 11706-06+ |
| 287 | Sold | 1000 | H17p | 5 | 11706-06+ |
| 355 | Sold | 10000/5000 | J+17/-16c 2x1 | 1 | 11704-06 |
| 370 | Sold | 5000 | M14p/19c Stgl | 108-11 | 11702-06 |
| 370 | Sold | 5300/4200 | J+14+p/J-15p | 30/41 | 11700-02+ |
| 374 | Sold | 2000 | H17 Stdl | 17 | 11630-31 |
| 444 | Sold | 1000 | H17/17+p 1x2 | 15 | 11700-01 |
| 560 | Sold | 1000 | J15p | 40 | 11631-31+ |
| 560 | Sold | 1000/500 | J+/M-14p Cal 1x2 | 14 | 11702-02+ |
| 685 | Sold | 500 | H17p/17+c Stgl | 10 | 11707-08 |
| 685 | Sold | 1000 | M16+c | 102 | ^M11519+ |
| 830 | Sold | 1000 | J14+p | 25 | ^M11526 |
| Local | Trade | 1000 | M20/22c | 8 | ^M11518 |
| Local | Trade | 500 | H17p/17+c Combo | 4 | ^H11703 |
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