Treasury Trading Update.

The US may remain the least troubled sector in the G-7 nations as other sectors : EZ, UK and Japan will have there troubles come to the fore much sooner. As we have seen these crisis’s do take tame to play out. Greece took much longer than it should have given it’s size however the time it took is what it took. According to a report by the people at the bank credit analyst, Japan’s situation will be dealt with prior to the U.S.’s so that may mean we have a couple of years before our situation is either dealt with or fully deteriorates. What I’m getting at is we may well continue to see a bull market in Treasuries for an extended period. Also the market this week will be moving inventory out of June futures into September, and if any of you would like to give some orders in that regard I can be reached at 01 312 432 5083. I will negotiate on size orders of course, and we do see some large liquidity still being executed in the pit, so by all means consider it. It can be a win – win situation, in terms of getting good execution at a competitive price.

As far as things being status quo for the near term, California is proposing to raise taxes to potentially un-bearable levels. Other states will have to follow suit, so I do not know what the situation is exactly in Japan, but I would think trouble and possibly complete hell is coming soon. But for now I will focus on the mundane matters such as the roll, the funding crisis in the short end, the premium sellers in the long end, declining commodity prices and the like.

Open interest declined by over 200K in the June futures (probably related to large option positions) there was an increase of around 65K in the Sep. contracts, but the net decline was large about 170K. That is notable, and I will be conferring and commenting on that later. Below are the larger flows in treasury options from Friday for your edification. Heavy call buying was noted in July 9950 calls and open interest did rise by over 60K in that strike.

10yr.
Vol picture:
Vol.	5/21/10	5/20/10
July	8.2	8.9
Aug	7.9	8.5
Sep	7.6	7.8
20+Stdl
July	229-232
Aug	311-315	235-240
Sep	348-352	350-356
Players
104	Bot	4000	U15p	19	12130/30+
197	Bot	6000	Q26/28c	11	12128/30
275	Bot	500	M22/22+c	13	^M12202
287	Bot	500	N18p	25	12128/28+
287	Bot	1000	M22+c	10	12200/00+
287	Bot	2000	N19/20+p	37/38	12131/31+
287	Bot	3000	M/N19+c cal	6/11	12113-14/12130/30+
287	Bot	2000	+U18/24combo	7	^U12020
287	Bot	500	Q15+/25combo+c	9	^U12014
370	Bot	5000	U83p	cab7	12110/12
684	Bot	1000	M22c	4	12108/08+
685	Bot	500	N20+Stdl	241	12118+/19
685	Bot	2000	U14p	16	12110/11
714	Bot	500	M22/22+c	9	^M12125
714	Bot	500	N16/18p	16	12130/30+
714	Bot	1500	Q18p	42	12116/16+
714	Bot	2500	M17+C	347	^M12107
714	Bot	1000	U18/24combo+p	10	^U12020
714	Bot	1500	Q22c	103	^M12113
714	Bot	1000	M/N19+c cal	4	12107/08
737	Bot	1500	N/U21Stdl Cal	118/119	12128/28+
020	Sold	500	U22+/23	17	12108+/09+
160	Sold	500	N20+Stdl	231	12107+/08
160	Sold	1500	U20+Stdl	348	12107+/08
287	Sold	5000	M20+/21/21+/22c Condor	12	12131+/00
287	Sold	3000	N23c	3	12131/00
287	Sold	2000	-M21/+U32C	8	12103/03+
355	Sold	2000	N18/19/20ptree	2	12107+/08
660	Sold	1000	M21+/22+c	25	12129/29+
660	Sold	4000	U20+/22c	42	12131/31+
660	Sold	6000	U24c	100/102	12130/30+
660	Sold	1000	U18/23Stg	200	12112/13
660	Sold	3000	N18+p	30	12118/19
660	Sold	5000	U24c	52	12115+/16
684	Sold	4000	Q24+c	42	12130/30+
685	Sold	500	U20+Stdl	360	^U12020
714	Sold	1000	M/N20c	12	12107/08
30yr.
287	Bot	500	N32/35c	12	12500/01
560	Bot	1000	M26c	6	12501/02
560	Bot	500	U15/21p	125	12420/21
714	Bot	1000	M75p	8/9	12521/22
287	Sold	1200	N24/27c	106	^U12410
560	Sold	500	N26c	148/147	U12418
560	Sold	2700	M24conversions	even
2 + 5yr.
355	Bot	2500	N11p	1
370	Bot	1000	Two Yr 05p	.5
714	Bot	2000	M16c	15.2/15.5
737	Bot	1500	Two Yr 09p	23.5
355	Sold	5000	Two Yr M-09.2c/U+10c	1
Fed Fund
Locals	B/S	250	Z68/75c vs37p	2
006	Bot	3500	U81/87c	.50	U9973+/74
006	Bot	100	G9900p	2	G9958+/59
006	Bot	150	V81/87c	.50	V9973/73+
287	Bot	550	+Q75p/-U62p	1
325	Bot	250	X75c	3	X9970/70+
690	Bot	800	N81c	.50	N9976+/77
690	Bot	1000	Q81c	.50	Q9975/75+
690	Bot	2000	X75c	3	X9969+/70
690	Bot	250	X/Z75c	even
815	Bot	250	X75c	3	X9970/70+
825	Bot	1000	G9900p	2	G9957/57+
287	Sold	1000	N81c	.50	N9976+/77
287	Sold	2000	Q81c	.50	Q9975/75+
287	Sold	500	U81/87c	.50	U9974+/75
287	Sold	2500	X75c	3	X9969+/70
690	Sold	1750	U81/87c	.50	U9973+/74
690	Sold	400	G9900p	2	G9958+/59
690	Sold	150	V81/87c	.50	V9973/73+
825	Sold	500	+U62p/-Q75p	1