Treasury Trading Update.

Front month Eurodollar contract came under selling pressure in the early going yesterday. Legitimate concerns over funding pressures came to light as articles circulated detailing the lapse of a large 371 day term loan set to expire on July 1^st.  There was heavy volume and liquidation in the Sep. Midcurve call options with 301K trading and open interest showing a net decline of 47 K on the preliminary report. The July Midcure’s also showed decent volume of 57K with open interest declining 26K. Most of that was New edge buying back a short position in the July midcurve 85/86/87 call tree, they paid 2 ticks on 15K. Regular Sep. call options traded 150K and the puts traded 128K. July puts traded 116K vs only 5.2K in the calls. Aug. puts traded 16K vs. 9.3K in the calls. Long story short option trading quite skewed towards bearish flows in yesterdays session.

Hourly charts are showing a bottom on the front month Sep. with move up continuing after Wednesdays early spike lower. Back month’s continue to trend higher. There is still enough confidence and control in the markets for the funding needs to bet papered over and therefore libor rates may well be able to hang around 53 basis point area.  Read an interesting article where some large money managers will be switching there benchmark from libor to OIS market makes a ton of sense.

Treasuries saw momentum shift to up and therefore a green light is on for playing the upside. Saw a bit of call buying and put selling as the Fed kept things on hold. Funding concerns will continue to be a dominate theme as many fiscal year ends lapse in June and July starts a new economic year. As Mr. Manzara notes the 2yr. note is just 4 basis points away from crisis lows made back in 2,008, the 10yr. treasury yields which due tend to fall steadily this time of year are still 100 + basis points  away from the lows back in 08.

Larger trades in Treasury and Fed Fund options from Wednesday listed below.

10yr.
685	Bot	500	U21Stdl	254	12027+/28
714	Sold	500	U22+c	48	12027+/28
370	Bot	500	U22c	58	U12026+
160	Bot	1000	Q20Stdl	207/206	12030/30+
660	Sold	500	Q18/24Stgl	20	12029/29+
714	Bot	700	U17/18p	10	12030+/31
160	Bot	750	Q20p	38	U12030
287	Bot	500	Q24c	9	12026+/27
287	Sold	1000	-Q20c/+N19+c	5	12026+/27
714	Bot	500	U21p	123	U12105
287	Sold	2000	-Q20c/+N19+c	1	12106/07
104	Bot	250	U24/25c1x2	7	12110/10+
287	Bot	2000	U22c	110	12112/12+
660	Sold	2500	Q19+p	9	12112/12+
714	Bot	2000	N22c	9	12112/12+
660	Bot	500	Q19+21p	30	12113/13+
287	Bot	1000	Q20p	30	12111+/12
685	Sold	1000	N20+p	5	U12110
685	Bot	1250	N20+/21p	7	U12110
560	Bot	1500	U21/23c	55	12110/10+
370	Sold	500	U20Stdl	305	U12110+
685	Bot	2200	Q/U21+Stdlcal	58/59	U12111
560	Bot	2000	N21/22+c1x2	26	12110/10+
714	Bot	1000	U20+/21p	14	12109/09+
197	Bot	5000	N21c	26/30	12105/06
193	Bot	1000	N21/22combo+p	6	12109+/10
685	Sold	1000	N20+p	6/5	12102+/06
685	Sold	750	N20+p	5	U12107
287	Sold	1000	N21/22combo-p	3	12110/10+
560	Bot	1000	U21/23c	55	U12110
160	Bot	500	U19+p	47	12109/09+
560	Bot	1000	U21/23c	54	U12107+
30yr.
370	Bot	500	N23/24p1x2	5	12501/02
660	Sold	1000	N26/27p1x2	7	12516/17
660	Bot	500	N25/27c1x2	30	12512/13
197	Bot	500	Q/u21p cal	41	12508/09
560	Bot	1500	U30c	60/61	12508/09
370	Bot	500	N26p	58	12510/11
2 + 5yr.
714	Sold	2000	-Q17c/+N17c	20/18
287	Bot	1000	Two yr Q108.7p	2.5
714	Sold	2000	Q18/19c	16
Fed Fund
006	Bot	1500	F62/68/75p fly	.50	F9971/71+
690	Sold	500	F62/68/75p fly	.50	F9971/71+
825	Sold	250	F62/68/75p fly	.50	F9971/71+
287	Bot	1000	G75/81c 1x2	2.25	F9970+/71
444	Bot	250	Z75c	4	Z9972+/73
287	Bot	1000	F75/81c 1x2	2.50	F9970+/71
006	Bot	2500	G81/87c	.50	G9966+/67
690	Sold	1000	G81/87c	.50	G9966+/67
690	Sold	500	Z75c	3.75	Z9972/72+
690	Bot	400	Z75c	3.75	Z9972/72+
690	Bot	500	X87c	cab5	X9974+/75
685	Bot	250	V56p	1.25	V9976+/77
287	Bot	500	Z75/81c 1x2	2.75	Z9973+/74
287	Bot	4000	F87c	.25	F9971.+/72
830	Bot	1000	X87c	.25	X9974+/75
830	Bot	1000	Z87c	.25	Z9973/73+
690	Sold	500	F87c	.25	F9971/71+
287	Bot	2000	X75/81c1x2	2.75	X9974+/75
690	Sold	750	X62/68/75p Fly	.25	X9975-75+
690	Sold	500	X/Z62/68/75p Fly Stupid	.50
915	Bot	1000	X75/81c1x2	2.75	X9975-75+
685	Sold	500	F81/87c	.75	F9971+/72
714	Bot	500	X/F81/87c1x2stupid	1.25
444	Sold	500	Z75c	4.50	Z9975/75+
690	Bot	250	Z75c	4.50	Z9975/75+
915	Bot	250	Z75c	4.50	Z9975/75+