Bond rally nearing an end?

All of the same monster hedge funds that were long earlier this year are doing the same again, but now also include most real money accounts like PIMCO and other bond mutual funds.
 
Vega fund loading up long again in the options, 30,000 bullish 5yr packages, 20,000 10yr combos, 5,000 30yr combos, all the same, selling just out of money puts to buy calls or call spreads. They are hit or miss sometimes, but like to gamble.
 
Riskarb,

Exactly, every month they usually put on large plays strictly in the front month just as the previous month expired. They are pretty plain vanilla plays and don't get too complex. For instance, the 5yr options play was selling 30,000 Oct 104.5 puts and buying 30,000 Oct 105-105.5 call spreads. Obviously max profit at expiration is 105-16 in futures. The 10yr play was selling 20,000 Oct 106 puts to buy 20,000 Oct 108 calls at 2 ticks to sell the puts. In the 30yr they bought 5,000 Oct 109-111 combos paid 1 to 2 ticks for the calls. What do you think of all of these?
 
Quote from mcurto:

Riskarb,

Exactly, every month they usually put on large plays strictly in the front month just as the previous month expired. They are pretty plain vanilla plays and don't get too complex. For instance, the 5yr options play was selling 30,000 Oct 104.5 puts and buying 30,000 Oct 105-105.5 call spreads. Obviously max profit at expiration is 105-16 in futures. The 10yr play was selling 20,000 Oct 106 puts to buy 20,000 Oct 108 calls at 2 ticks to sell the puts. In the 30yr they bought 5,000 Oct 109-111 combos paid 1 to 2 ticks for the calls. What do you think of all of these?
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Long the risk-reversal in size. It's a convexity play as well. It's very bullish when played as an outright position. I am sure they are hedged with spot, but they are long upside d/vega, delta and d/gamma. All of the greeks are linear to the upside PnL, save for gamma; which is strongly convex.

There is an expectation of a flattening curve, as well as the outright long.
 
I still think the market needs to trade a bit lower yet to accomodate almost record supply for the month of September at something around $70 billion corporate and up to possibly $20 billion CMBS. If the last two days and the move down to 106-24 in TY are it then maybe Vega will be right on these positions. Goldman is starting to cover their short December 107 straddles, about 5,000 today of the 20,000+ position.
 
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