Futures Curve by Accutic

Treasury Trading Update.

ADP payroll data was 63K below expectations and fixed income rallied on pretty good volume. The Chicago ISM data was a bit weaker than expected as well and this left 10yr. note futures trading right near session highs. The 9:00 factory orders data however was on the strong side and now prices are tumbling a bit more.

On the bigger picture I am still very keen on watching commodity prices as the price indices such as the CRB tend to move very similarly to 10yr. yields. http://financialfutures.typepad.com/kiss/2010/03/treasury-trading-update-20.html.  As the charts below show 10yr. yields have taken off as they tend to do around the middle of March. Commodity prices for the moment are no where near as robust. However Crude seems to have some firmness, for CRB index component break down see http://financialfutures.typepad.com/kiss/2010/03/treasury-trading-update-26.html traders point out potential sanctions against Iran, bombings in Russia, were supportive. Prices seemed to have pulled back a bit on the inventory data that was well above consensus.

Technically so far prices almost retrace 50% of the down move but have now receded allowing shorts some decent breathing room. Will have to get by the balance of today and survive any late buying from index crowd, but so far so good for the shorts.

Current picture on 1 hour barchart seen below.

Chart below shows yields probably got a bit ahead of themselves but I would look for commodity prices to remain firm and perhaps pick up a bit.

Below are flows from one of the crack floor based teams we are lucky to know. They need food

like the rest of us to operate so do your best to get some our way.

    WK1 82P PAPER SELLS 2K @ 2 WORKING MORE

 

(7:25:37 AM):     TYM 112.5P COVER 08 SELLING 11'S

 

(7:25:55 AM):     SELLS 500 WORKING MORE
7:28 am
(7:28:38 AM):     FVK 114.5 C PAPER SELLING @41,  SELLS 1K FILLED

 

(7:29:54 AM):     E0K 80/ 81 P STUPID PAPER SELLS 2K @ 10.5 WORKING MORE
7:30 am
(7:30:51 AM):     1KJ 82/ 85 COMBO PAPER PAID 1 FOR 1K FILLED, BOT CALL

 

(7:31:56 AM):     OPENING TREASURY STRADDLES...  TU 108.5 ^ COVERED M 108-14, K 21-24, M 30-33...       FV 115 ^ COVERED M 114-26, K 61-100, M 124-127...       TY 116 ^ COVERED M 116-06, K 129-131, M 208-210...       US 116 ^ COVERED M 116-04, K 210-216, M 312-318.

 

(7:32:32 AM):     TYM 112.5P COVER 09 PAPER SELLING @ 10 7:33 am
(7:33:32 AM):     BOSTON SELLS 5K ALL DAY DIFFERENT LVLS.. COVER 09 SOLD 9 UP 7:40 am
(7:40:02 AM):     E0K 80/ 81 P STUPID PAPER SOLD 10K ALL DAY 10.5 DOWN TO 9.5 WORKING MORE @ 9.5, ADVANTAGE 7:42 am
(7:42:35 AM):     TYK 113P PAPER PAYING 3, BID

 

(7:43:21 AM):     BUYS 1K FILLED, STILL LOOKING
7:46 am
(7:46:49 AM):     E0K 80/ 81 P STUPID ADVANTAGE SELLS 10K @ 9.5, 20K ALL DAY 10.5 DOWN TO 9.5 FILLED FOR NOW 7:53 am
(7:53:59 AM):     E0J 82/ 83 P SPD COVER 45, 3'S TRADE 2750

 

(7:54:47 AM):     TYK 114/ 115 P SPD 10/ 11 7:56 am
(7:56:06 AM):     E0J 82/ 83 P SPD COVER 45 FIMAT PAID 3 FOR 3K, COVER 44.5 PAID 3 FOR 2K, 5K ALL DAY 7:58 am
(7:58:52 AM):     1KJ 82/ 85 COMBO PAPER LOOKING .5/ 1.5 CALL 8:02 am
(8:02:59 AM):     E0M 75/ 77 P SPD FIMAT SOLD 10K @ 1.5 ALL DAY FILLED 8:08 am
(8:08:52 AM):     ED J/ K/ M 96 C FLY  LOCALS TRADE .5'S 10K TO THE K, STEIN BOT 8:39 am
(8:39:48 AM):     TYK 114/ 115 P SPD 10/ 12

 

(8:41:27 AM):     PAPER 11B 8:42 am
(8:42:55 AM):     FFQ 75/ 81 C SPD PAPER PAYS 2.5 FOR 250 BID FOR 750

 

(8:43:30 AM):     TYK 115P PAPER PAYS 18 FOR 1K FILLED 8:44 am
(8:44:57 AM):     TUU 107/ 107.5 P SPD PAPER PAYING 9

 

(8:45:16 AM):     BUYS 2K FILLED, FIMAT

 

(8:45:44 AM):     LOOKING AGAIN 8:48 am
(8:48:07 AM):     FIMAT BUYS 5K ALL DAY

 

(8:49:08 AM):     LOOKING AGAIN 8:53 am
(8:53:02 AM):     USM 111/ 112 P STUPID PAPER SELLS 1500 @ 41 WORKING 500 8:58 am
(8:58:59 AM):     EDU 95/ 96/ 97 C FLY DEUTSCHE PAYS 4 FOR 20K FILLED

 

(8:59:58 AM):     TYM 112.5P COVER 07 SELLING 10'S, SELLS 3K WORKING MORE
9:01 am
(9:01:42 AM):     TYK 115P PAYING 18

 

(9:01:59 AM):     BUYS 2K RIGHT HERE:07 am
(9:07:37 AM):     EDU 95/ 96/ 97 C FLY DEUTSCHE PAYS 4 FOR ANOTHER 10K, 30K ALL DAY 9:28 am
(9:28:02 AM):     TYM 120 C PAPER SELLS 2K @5, FILLED 9:49 am
(9:49:11 AM):     FF U62-68-75PFLY TRADES .5 5500XS WESTCOT+ .25-.75

 

(9:50:30 AM):     E0J 82P PAPER PAYS 4 FOR 5K FILLED 9:51 am
(9:51:23 AM):     TYM 118/ 119 C 1X2 PAPER SELLS 1500 @ 1 FILLED, 1 LEG 10:19 am
(10:19:40 AM):     TYK 115.5/ 117.5 CBO PAYING 16

 

(10:20:09 AM):     BUYS 4700 BID FOR 300

 

(10:21:09 AM):     UBS BUYS 5K FILLED 10:22 am
(10:22:09 AM):     +PUT 10:39 am
(10:39:37 AM):     EDU 95/ 96/ 97 C FLY PAPER PAYS 4 FOR ANOTHER 5K BID FOR MORE, 35K ON THE DAY
10:49 am
(10:49:54 AM):     TYM 112.5P COVER 06 SELLING 10'S
10:59 am
(10:59:51 AM):     E0J 80/ 82 P SPD PAPER @ 3, TRADES 2K WORKING MORE

Treasury Trading Update.

Chart below shows extreme neutral price action. Early in yesterdays session rumors which turned out to be false regarding confidence numbers helped push prices a bit lower prior to 9:00 a.m.c.s.t.. Once the data came out below the rumors prices moved a bit higher and remained in a small range the balance of the day. Open interest did decline mildly by around 5K and currently stands at 1,500K

Today brings the month end duration trade, however for treasuries the extension was .06 not all that much. For MBS however the extension was .13, so there could be some buying in the long end based on that. On the other side I am expecting strong Chicago ISM data to put some downward pressure initially, however keep in mind that the month end buying usually continues right into the final hour, so will not expect too much further downside action until tomorrow and Friday. Keep in mind trade may thin out quite a bit for the balance of the week, but do remain vigilant at all times.

Larger flows in 10yr. opts. listed below. See notes on large Sep. Trade initially.

Sorry the Below open interest data is Sept. 10yr. Calls not Puts will change post later.

 

 

 

 

 

 

197	Bot	20000	U121/122 c	4	11525+/26
355	Bot	2500	K19C	3	11529+/30
560	Bot	1500	M12/14P1X2	8	11529+/30
660	Bot	2000	M121+C	2	11526/27
660	Bot	+3000/-2000	+M12+/14+/15+PTREE -M18+C	+9/-14	11529+/30
684	Bot	1000	K13+/14+/15+P FLY	11	11524/24+
684	Bot	500	M12/13+P SPD	12	11527/28
685	Bot	1000	K16^	132	11526
709	Bot	1500	M14P	30	11527+/28
830	Bot	500	M17C	36	11525+
006	Sold	2000	K14/17+ STG	22	11529+/30
197	Sold	500	M16^	209	11530
287	Sold	700	K12+/14P SPD	10	11520/21
374	Sold	2000	-M13/15P SPD +M19/20C SPD	25	11526+/27
685	Sold	500	K16P	50	11529+/30

 

Treasury Trading Update.

A fairly tame session yesterday, however (let me set down my glasses for emphasis) however, the open interest rose 28K in the June 10yr. futures to 1,513K (preliminary) and that puts it back almost to the high for the year last Thursday the 25^th  of 1,529K.  So this market remains in a strength mode and the Bears are in control. Those of you who have come late to the party do not have the comfort of being short this market from above 117’00 and may have to endure some heat. Again this is a long term trade and money management wise those with strong shorts (above 117’00) should have a stop in on part of the position around 116’13.5 which would be a 50% retracement of the 3/18/10 high of 117’17.5  to last Thursdays low of 115’09 see chart below. Those holding short positions established late last week, say under 116’00 should look to add to shorts on rallies. I will be watching the price action closely and will expect further sale opportunities to emerge. In order for the bulls to gain control of this market a number of things will need to happen, so do stay with me and feel free to call 01 312 432 5083 for a consultation. Also please find and read the disclaimer at this time or call and I will direct you to it. Currently the blog still has some bugs regarding navigation to it.

Some factors to be aware of this week that will have an impact on prices include the index related buying that occurs especially when new securities of long duration are added to the mix (which will be the case this month as we did auction 10 and 30 year securities). I will hope to have some intelligence on the Index later today. On the bearish side as I noted yesterday we should see economic strength via the ISM data on Wednesday and Thursday followed on Friday by a substantial increase in non farm payrolls.

Chart below shows area currently focused on in terms of trading the market. Again this is tricky business and the battle between the Bulls and Bears rages and is getting quite exciting with the stakes rising. Digest the information carefully and again feel free to call with questions.

 

This market can be like a wild bitch at times, you know the tune

"Every thing about her drives me wild" check these pathetic looking creeps out. http://www.youtube.com/watch?v=HjX4D92S6MM

Good luck to day and tune in the rest of the week , I believe accuchick will be making a celebrity appearance.

Below are yesterdays larger option flows courtesy as always from the floor grunts at geo-cties.

10yr.
355	Bot	1500	K 14/16P1X2	7	^M11530
370	Bot	500	M14P	30	^M11528
560	Bot	3000	K14/15+P SPD	26	11528/29
560	Bot	4000	M12/14P1X2	8	11525+/26
660	Bot	2000	K15P	26/27	11528/29
660	Bot	3000	+K15P/-17C	9	^M11526+
685	Bot	750	M16+^	213	^M11527
714	Bot	500	M16^	11	11529/29+
197	Sold	1000	M17C	40	^M11530
287	Sold	1000	K16C	49	11601/01+
287	Sold	1200	M19/20 C SPD	24	^M11529+
560	Sold	1000	K18C	8	11601+/02
685	Sold	2000	M17^	219/218	^M11528
709	Sold	2000	K14+P	18/17	11528+/29
714	Sold	500	M14P	29	^M11529/
30yr.
116	Bot	2000	M12/13P SPD	15	11515/16
287	Sold	500	M15C	154	11511/12
660	Sold	1500	K13P	22/21	11514/15
660	Sold	600	M18/20C SPD	24	11515/16
2 + 5yr.
660	Bot	3000	M114P	27/28
Fed Fund
287	Bot	2000	X68/75c	3	X9952+-53
690	Bot	100	x56/62/68/75C  CONDOR	.25	X9953/53+
714	Bot	2500	X68/75c	3	X9952+-53
714	Bot	1000	X62/75C SPD	6.2	X9953/53+
690	Sold	1700	X68/75c	3	X9952+-53
815	Sold	1000	X62/75C SPD	6.2	X9953/53+
815	Sold	500	X56/62C SPD	3.2	X9953/53+
825	Sold	1500	X68/75c	3	X9952+-53

 

Treasury Trading Update.

First thing I was keen to look at from Fridays session was the open interest change. We finally did see the market lose about 31K vs. the June 10yr. note futures in open interest. Not all that surprising given the amount we have gained over the last few weeks. Prices rose after Thursday’s session brought in a lot of short hedges against option positions that were becoming quite uncomfortable and no doubt other long positions were being hedged and new shorts were coming into the market in droves.

April options expired Friday. The 116 and higher strikes were exercised to the tune of about 57K. Volume in the May puts was 87K and June traded 71K. Open interest was up 42K and 22K respectively on the prelim report. May calls traded 32K with O.I. up 14K and the June calls trade almost 21K with O.I. up 7.2K. Bears are out of hibernation and they seem hungry. Players are listed below from Friday.

 

Take a look at some of the Major reports due out this week. The Chicago ISM data is due on Wednesday, followed by the National read on Thursday, both look to be on solid uptrends. Friday we will be open briefly and the Unemployment release comes out. All this stuff should re-enforce a short position, in fixed income via the June 10yr. futures, in my estimation.

 

For more on reports go to .http://www.cmegroup.com/tools-information/calendars/index.html .

 

One last Item Greenspan on Friday noted that the indigestion noted in the treasury market auctions this week constituted the proverbial canary in a coal mine. I’m at 01 312 432 5083.

 

Below are larger flows on treasury options from Fridays session.

 

10yr.
197	Bot	500	K18C	8	11520/21
287	Bot	1000	K12+/14P SPD	12	11520+/21
287	Bot	1000	K17/18+1X2	11	11523/23+
287	Bot	1000	K13/14/15 PFLY	8	11526+/27
287	Bot	500	J16P	8	11531/31+
287	Bot	500	J16C	5	11531/31+
355	Bot	2500	J16C	2	11523/23+
355	Bot	10000	K14/16P1X2 WITH M14P	54	^M11530
560	Bot	1000	M14P	33	11523+/24
660	Bot	500	M12/14P 1X2	8	11518/18+
660	Bot	1500	M17C	35	^M11520
660	Bot	500	J15+/16 STG	5	11526+/27
660	Bot	1000	M121+C	2	11527/27+
660	Bot	3500	M13P	19	11528+/29
685	Bot	1500	K15P	38	11519+/20
690	Bot	1000	J16P	4/5	^M11600
709	Bot	500	M13P	24	11517/17+
709	Bot	3000	K13/15P	27	11519/20
709	Bot	+1K-4K+2K	+M10P/-M12P/+M14P	18	11531+/00
714	Bot	6000	M14+/15P SPD	11	11520+/21
714	Bot	1500	K13+P	13	11521/21+
714	Bot	500	K17/18+C 1X2	10	11518+/19
714	Bot	4000	K13+P	13	11521+/22
LOCAL	Bot	500	K/14/19COMBO	3	^M11524
197	Sold	5000	J15+P	CAB 3	11529+/30
197	Sold	1000	M18C	21	^M11530
287	Sold	1000	M14P	28-31	11527+/2830+
370	Sold	2000	K13P	7	11528/28+
660	Sold	1000	U111P	55	11516+/17
660	Sold	1500	K16P	49	11600/00+
660	Sold	500	K16+P	101	1160+/01
660	Sold	1000	M17C	41	^M11600
690	Sold	2000	K16^	135-36	11529+/30
714	Sold	1000	K15+^	141	^M11522
714	Sold	500	M15+^	216	11528+/29
714	Sold	500	J16/16+/17C FLY	2	11529+/30
714	Sold	2000	K15/16+P	41-42	11529/31
830	Sold	500	K-12/19c Combo	3 put	^M11517
30yr.
006	Bot	1000	J16C	1	11504/05
287	Bot	500	K12/15P SPD	53	^M11508
287	Bot	1000	K16C	60	^M11516
660	Bot	1000	M111P	30/31	11501/02
560	Sold	1000	M18C	42	11510/11
2 + 5yr.
006	Bot	5000	K16C	6
355	Bot	3000	K110+P	1
690	Bot	6000	TU M  108.5/108.7C SPD	6
355	Sold	3000	TU M 108P	8
714	Sold	1000	TU M 108+C	1/1+
Fed Fund
006	Bot	2500	X68/75 C 1X2	1.7	X9952+/53
287	Bot	1000	Z 75/81 C SPD	1	Z9944+/45
287	Bot	1000	X75/81 C SPD	1	X9952/52+
287	Bot	1000	K62P	.25	K9979/79+
690	Bot	200	X50/56P STUPID	25	X9952/52+
714	Bot	10000	X 68/75 C 1X2	1.7	X9952/52+
714	Bot	1500	X62/75 C SPD	5.7/6	X9952/52+
714	Bot	5000	X75/81 C SPD	1	X9952/52+
714	Bot	250	X75/81/87CFLY	.7	X9952/52+
714	Bot	500	X75C	1.2	X9952+/53
915	Bot	500	K75P	.75	K9979/79+
915	Bot	200	M62/75P1X2	.50	M9978/78+
287	Sold	1000	K75P	.75	K9979/79+
690	Sold	2500	X68/75 C 1X2	1.7	X9952/52+
690	Sold	250	X 62/75 C SPD	6	X9952/52+
690	Sold	1000	X75C	1.2	X9952/52+
690	Sold	1000	X 68/75 C 1X2	1.7	X9952+/53
690	Sold	2000	X 75/81 C SPD	1	X9952+/53
690	Sold	300	Z 50C	12.5	Z9945+/46
714	Sold	500	X75C	1.2	X9952+/53

 

Treasury Trading Update.

Monthly continuation chart shown below is another look at a rather substantial Head And Shoulders top. The neck line has been penetrated (again) and this time with quite a bit of increasing open interest and volume which very much confirms this pattern. Unless the market moves above and closes above the neck line a core short position is warranted. See Disclaimer at this time.

10yr. Options flows from this a.m. showing good buying of Bearish put structures in May.

TY
Fimat	B	4,000	K113.5 p	0.13	11521.5/22
Barclays	B	3,000	K113/115 p spreads	0.27	11519.5/20
RJO	B	1,500	K115p	.36 to .38	11517-20
J.P. Morg	B	500	M112/114 p 1X2's	0.08	11518/18.5
J.P. Morg	S	1,000	U111p	0.55	11516.5/17
Barclays	B	500	M113p	0.24	11517/17.5
0	B	500	K117/118.5c1X2's	0.1	N/A
0	B	1,000	K112.5/114 pspreads	0.12	11520/20.5
Fimat	B	6,000	114.5/115pspreads	0.11	11522.5/23

Treasury Trading Update.

As the disclaimer notes “the information in this report is for information purposes only and the sources for this information including the exchanges themselves are deemed reliable by the writer, although no warranty as the the accuracy of the information is being made.

In yesterdays report I noted open interest up 25,000 at 1,553,104. I obtain this information from the CME group website http://www.cmegroup.com/daily_bulletin/Section42_10YrNote_5yrNote_2yrNote_30YrBond_Options_2010057.pdf . This number was incorrect obviously, and I apologise for not noticing. They were having trouble with the sight and did not publish the data until very early the following day, so in my haste I missed a glaring error.

Not so bad though, bottom line is open interest did indeed rise from 1,480K Tuesday to abount 1,500K Wednesday, and yesterday rose around 30K more. I must stress that since the final revisions do not come out until later today, these types of errors will continue. But unless there is anything totally out of the ordinary I will continue to work with the preliminary data. Thi important point is open interest continues to rise, this must be noted.

Having said that 10yr. yield soared again yesterday with prices of 10yr. futures making session lows shortly after the auction results. Prices currently off that low trading around 11529. I am still contending prices will be lower, from current levels come early June, and the way the volume and open interest is behaving on this down move my confidence becomes stronger each day. I will look to continue to scale into a core short position in this market on any rallies.

If you are not short this market above 117’00 and are looking for spots to get in and where to put protection, you can call me at 01 312 432 5083 for a consultation.

Below is a listing of option flows from yesterday. Note Fimat still betting heavily against any tightening via their activity in Nov. Fed Fund Options. Some good 2 way flow in 10yr. options also with cheap plays on some OTM options. April options expire today. Heavy liquidation in April put options the 116 strike open interest is down form 60K earlier this week to close to 30 heavy buying in that strike no doubt exacerbated the move down yesterday. You may want to click the link above and take note.

10yr.
092	Bot	1000	J16+C	4	11531/31+
197	Bot	1000	K13+/14+/15+TREE	6-7	11528/29
197	Bot	500	M15/16P SPD	30	^M11514+
281	Bot	500	J16C	12	11528+/29
287	Bot	1000	K19C	4	11531/31+
287	Bot	5000	J16+C	1-2	11513/23+
287	Bot	1500	J15p	4	11517+/18
287	Bot	2000	J16C	4	11514+/15
287	Bot	700	J15/16P1X2	22	11519+/20
355	Bot	3000	K15P	34	^M11529
374	Bot	500	M15+/17C SPD	45	11517+
560	Bot	1250	M16+^	223	11600
660	Bot	1500	J16P	17	^M11600
660	Bot	1000	J15+P	8	11526/26+
660	Bot	500	J15/17 STG	4	11524/24+
660	Bot	1000	K13/13+P	4	11522/22+
714	Bot	5000	J14+P	1	11530+/31
714	Bot	3000	K14+P	26	11528/28+
714	Bot	2000	K14P	17-18	11530+/11600
714	Bot	500	J16/16+/17C FLY	6	11525/25+
714	Bot	1000	J15+P	11	^M11518+
737	Bot	600	K14/14+P	7	11528/29
737	Bot	500	J16P	17	^M11531+
197	Sold	2000	K16+C	34	11526/26+
287	Sold	1000	K16C	55	11600+/01
287	Sold	1500	M17C	44	^M11530
287	Sold	1000	K16C	54	11530+/31
287	Sold	1000	M17C	41	11528+/29
287	Sold	1000	J15+P	9	11525/25+
287	Sold	1500	U11P	55	11517+/18
355	Sold	5000	-K16C/+17C 1X2	EVEN	11600/01
370	Sold	4000	J15p	4	11514/14+
560	Sold	1000	M17C	42	11529/29+
560	Sold	5000	j15/16p spd	33	11514
660	Sold	500	K15/16C	38	11529+/30
660	Sold	1000	M16^	220	11531+/00
660	Sold	2000	M17C	34	^M11518
685	Sold	500	M14/18 STG	54	11517+/18
709	Sold	750	J14+/15+P	8	11513/14
714	Sold	1000	J15P	4	11517+/18
737	Sold	1700	J16^	27/28	11531+
737	Sold	500	J16P	34	^M11517
30yr.
006	Bot	2000	J13p	1	11507/8
006	Bot	500	M115^	336	11505/06
148	Bot	500	K18/20c	15	11507/8
287	Bot	1000	K13P	29	11517/18
560	Bot	1500	K17/19/120 C TREE	24	11526/27
560	Bot	2500	J14p	4	11508/9
560	Bot	500	K19/20 C SPD	5	11507/08
560	Bot	800	J15/16P SPD	41	11506
732	Bot	1000	K19/20 C SPD	5	11501/02
006	Sold	1000	J14p	3/4	11506-07
116	Sold	2000	M13/15P SPD	42/44	11524/25
370	Sold	1000	J115C	22	11506/07
560	Sold	1000	M16P	213	11503/04
Fed Fund
001	Bot	100	X 68/81C SPD	3.2
287	Bot	500	M62P	.50	M9978/78+
287	Bot	100	Q 75/81 C 1X2	1.5	Q9971/71+
287	Bot	750	Z75/81 C SPD	1	Z9944+/45
690	Bot	300	X 50/56P STUPID	22	X 9951+/52
690	Bot	2000	Z 75/81/87C FLY	1	Z9943/43+
690	Bot	300	X 68/75 C SPD	2.2	X 9951+/52
690	Bot	500	Z 75/81 C SPD	1.2	Z9943/43+
690	Bot	700	X68/75C SPD	2.2	X9950/50+
690-	Bot	2000	X81/87 C 1X2	.25	X9952+/53
714	Bot	800	X 75/81/87C FLY	1	X 9951+/52
714	Bot	6000	X68/75C SPD	2.2	X9950+/51
714	Bot	8000	X 62/75C SPD	5.2/5.7	X9950/50+
714	Bot	5000	X68/75C 1X2	1.2/1.5	X9951/51+
915	Bot	500	Z 75/81/87C FLY	1	Z9943/43+
Local	Bot	500	M 62/75P 1X2	.50	M9978/78+
690	Sold	750	X 75/81/87C FLY	1	X 9951+/52
690	Sold	700	X68/75C SPD	2.2	X9950/50+
690	Sold	15000	X68/75C SPD	2.2/2.7/3	X9949+-50+
690	Sold	800	X62/75C SPD	5.25	X9950/50+
690	Sold	3000	X68/75C 1X2	1.2/1.5	X9951/51+
690	Sold	2000	X81/87 C 1X2	.25	X9952+/53
714	Sold	1000	X 50/56P STUPID	22	X 9951+/52
714	Sold	500	M62/75 P SPD	1	M9978/78+
2+5yr.
444	Bot	2000	TU M108.2p	15+-16+
714	Bot	1000	TU K107.7/08/108.2p Fly	2+
287	Sold	1000	K115c	25-24+

Treasury Trading Update.

Yesterday dealers were loading up on out of the money puts in June 30yr. options. They trades on the screen so unfortunately we don’t know if the instigator was a buyer or a seller, but I’d be willing to bet they were buyers with market makers selling, but just a guess at this point. Floor sources did see Merril buying some of the May 30yr. puts yesterday. Exchange report verifies pretty much record volume so far this year in 30yr. options or close to it.

Dealers are buying put structures today vs. the May 10yr. options. As noted earlier there was very good activity yesterday.

TY
0	B	3,000	K114.5 put	0.26	11528/28.5
Swiss B	B	500	K113/114/115 put ladder	0.06	11528.5/29
Swiss B	B	500	K113.5/114.5/115.5 put ladders	0.07	11528.5/29
Adv.	B	600	K114/114.5 pspreads	0.07	11528.5/29
J.P. Morg	B	500	J116 puts	0.17	^11600
Mann	S	1,000	M117c	0.44	^11530

Goldman putting on some steepening trades in the mid to long end of curve. 

NOB
Goldman	B	1,500	TYM		11530
Goldman	S	1,000	USM		11520
FOB
Goldman	B	2,500	FVM		11418
Goldman	S	1,000	USM		11521

Treasury Trading Update.

Huge day in 10yr. futures yesterday. Volume was the highest for the year “if you skip the calendar rolls” as over 1,600,000 contracts traded. And more importantly although I would very much suggest there was a fair amount of liquidation by some longs, the open interest actually rose another 25K yesterday and now stands at 1,503,000 a new record for the year. This means there is still plenty of fuel in this market.

With another heavy supply schedule culminating today a very learned colleague pointed out that results of these auctions are indicating a bit of indigestion and this does not bode well. Specifically the “tail” on the auctions indicates that the bidders at the auctions are not very aggressive and therefore the seller (US Treasury) in this case is forced to distribute the auction in a manner  offering ever higher yields to those weaker bids that might normally miss out on receiving securities.

Take a look at previous sloppy auctions and the result in 10yr. yields following these events.

WHAT IF 7YR AUCTION TOMORROW DOES TAIL?

  Note that historically, the pattern of 3 tailed auctions in 1 week is

dangerous.  This past December 2009 saw 3 tailed auctions and we all remember

what happened to the mkt during that month - 10yr yields sold off 60 bps

-> WEEK OF 11Dec2009

3s -  tailed 0.5

10s - tailed 4.3

30s - tailed 4.5

-> WEEK OF 27April2009   - 10YR SOLD OFF 40 BPS IN APR & ANOTHER 20BPS OVER THE

NEXT 2WKS

2yr: 04/27/09    1.2bp tail

5yr: 04/28/09    1.0bp tail

7yr: 04/29/09    1.0bp tail

Also scroll back to yesterdays late session update for further bearish elements.

Option trade was very active yesterday, good buying in June 114.5 puts volume was over 30K with prelim O.I. up over 19K. Total volume in June puts was 94K with O.I. increasing by at least 40K. April and May puts and calls were active as well. For more info you can reach me at 01 312 432 5083.

Larger players in 10yr. options listed below.

092	Bot	1000	J17C	4	11606/06+
287	Bot	500	M16P	52	11626+/27
287	Bot	500	J15+C/-K16+C	19	11619/19+
287	Bot	500	U15C	200	11615/16
287	Bot	1000	J15P	2	11616+/17
287	Bot	1000	K16+^	140	11612/13
287	Bot	650	K16^	43	11604/05
355	Bot	2500	J17C	27	11620+/21
370	Bot	1000	J17C	8	11621+/22
370	Bot	2000	U18/19+C SPD	21	11614+/15
370	Bot	1000	j15+/16p	10	11602+/03
660	Bot	20000	M14+P	29/30	11619/20
660	Bot	500	U111P	40	11618/11618+
685	Bot	500	M17^	214	11629/30
685	Bot	4000	J16+^	41/38	11621
685	Bot	500	J17^	37	11614
714	Bot	1000	J17^	35	11629
006	Sold	1000	J16P	17	11604+/05
197	Sold	500	J17P	23	11627+/28
287	Sold	1000	J17P	27/28	11622
287	Sold	5000	M120C	10	11620/20+
355	Sold	5000	K17/18C1X2	5	11620+/21
370	Sold	500	J/K16C CAL	28	11619+/20
370	Sold	7000	M14/19STG	41	11611/11618
370	Sold	1000	J17P	31	11620+/21
370	Sold	2000	J16P	9	11617/17+
370	Sold	500	J/K16C CAL	30	11614/14+
444	Sold	500	J15/18COMBO	1	11617/17+
560	Sold	1000	M16P	58	11616+/17
560	Sold	1000	J16/16+/17C TREE	12	11605
660	Sold	2500	M16+^	218/217	11621
660	Sold	2000	J16P	22	11531+/00
660	Sold	1000	J16+C	9	11600/00+
660	Sold	1000	J16+P	31/32	11604+/05
685	Sold	1500	U121/122C SPD	6/5	11510/12
685	Sold	2000	J17^	42/41	11619
685	Sold	500	M16+^	218	11621/21+
685	Sold	500	J16/17STG	12	11618
685	Sold	500	J16^	42	11605
685	Sold	500	M16+^	221	11608
714	Sold	2000	M15P	35	11618+/19
714	Sold	1500	J16+P	15	11616+/17
830	Sold	500	U121/122C SPD	5	11510/12
830	Sold	500	J16P	5	11620/20+
830	Sold	1500	M108+P	2	11621
830	Sold	5000	M14P	29/30	11603/03+

Treasury Trading Update.

Something very important is going on here Valentine.

Yields rose mightily on 10yr. treasuries (take a look at bonds if you really want to see some price action), and are now confirming the pattern I made note of last week. http://financialfutures.typepad.com/kiss/2010/03/treasury-trading-update-20.html . A number of factors have been cited – the main one being the inversion of the 10yr. swap vs. the 10yr. treasury yield spread. Other factors to note moving forward is the open interest picture in April 10yr. put options which expire this Friday, and more importantly the head and shoulders bottom on the 10yr. yield chart.

Weekly picture on yield which I have been watching for quite some time is forecasting an impending huge move higher in yields. The head and shoulder bottom pattern will need yields to move and close convincingly above 4% to validate the pattern. The seasonal pattern noted last week might be enough to penetrate the neck line however we could certainly go into a sideways pattern as the Government might find a way to contain yields from running to high to fast. The big strangle seller has been selling more 114/119 strangles vs. the June future today at 41/32nds or $640.63 each. They were selling it back in Feb. for around 1 and 8/32nds or $1,125 each. So they are not too worried yet about a possible run a way yield.

April option Open interest on the puts shown below.

Treasury Trading Update

·        10yr. Swap rate goes below 10yr. treasury rate, lots of trade spawned and lots of pain.

 

·        Pundits point out last year when this happened in 30's a lot of it had to do with counter parties receiving fixed from Lehman had to scramble to find other counter parties when Lehman went under, and similar to now a number of bets claiming that swap rates could not go below treasury rates got killed.

 

 

·        No doubt some of the open interest buildup “from the initiating shorts” was hedges in case these rates did invert. We are seeing the results pretty heavily this a.m.

Some of the bigger flows in 10yr. opts listed below.

TY
660	B	30,000	TYJ114.5 put	.29 and .30	^11619
0	S	2.5	TYM114/119 strangles	0.41	11619-21
0	S	2,000	J117 straddles	.42 and .41	^11619
0	S	5,000	K117/118c 1X2's	0.05	11620.5/21