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+ |
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