Another crazy day with everything screaming to the upside, began with the 10yr flattening the curve and breaking through some pretty solid resistance. For the rest of the day the 2yr led the way and the curve only flattened by 2 basis points. Another 20 tick rally in the ten year and the curve only musters a small flattening, again I would be suspect of the long end. Two year repo rates have yet to begin loosening so the squeeze is still on and driving most of this move because everyone was short twos in the flattener. I would still be suspect of huge long end moves, Goldman prop still short every 107 straddle from April out to Sep, bought strangles the last few days to mark the position and hedge, but they still maintain core short volatility positions in SIZE. Be careful holding longs overnight, someone bought puts and sold calls (outright bearish combo) to the tune of about 20,000 combined in every month after the close on the screen.
Bond rally nearing an end?
- Thread starter gharghur2
- Start date
No idea who it was, definitely not the Japanese, they bailed on 25,000 of their May 106 puts in the ten year at a decent loss. The order was very strange after the close, it was mostly 500 lots executed instantaneously, buying any put that was offered and selling any call that was bid (including calls at 1 tick).
Quote from Surdo:
That would please me today!
http://www.federalreserve.gov/BoardDocs/speeches/2006/20060316/default.htm
Reading through his speech definitely displays the differences between east/west thinking. FWIW, my humble opinion.
To fight a hard asset bubble/depression you tinker with rates.
To fight a paper asset bubble/depression you tinker with liquidity!
Raising rates during a paper asset bubble does nothing until the bubble bursts, and then it makes things worse than they were before the bubble started ala ... Greenspan 2000! During the crash of 1987, rates didn't change, liquidity did, easing the after effects of the fallout. What the maestro should have been doing during 1999 was to be tightening the money supply.
Raising rates during a hard asset bubble makes these assets less affordable, thus decreases demand. Well done maestro! However, interest rates better be tuned to the relative inflation numbers, or else you live in Japan and want a hard asset depression for a decade.
Does any of this make sense to anyone but me?
My guess is because of the timing it may have been an option local who had blown out and had his positions automatically liquidated after the 2pm pit settlement prices were disseminated. On the other hand, it could have been sneaky paper waiting till after the close to execute a very bearish strategy without many knowing. Will take a look at time and sales tomorrow morning when I get in to see exactly what this guy was doing on the screen.
Bonds will probably correct today.
All of the option trades occured at 1:58 P.M. at the exact same time only on the screen. The guy bought 500 lots in any out of the money put that was worth less than 10 ticks and sold any out of the money call that was a 1 tick only bid. This was done in every month across various strikes, at least 10,000 total. Very weird that these trades occured simultaneously as if it was part of a strategy.