Bond rally nearing an end?

Option locals bought the puts, initially quoted vs. 01.5 bid at 02, with the hedges being filled up to 10. Was a fun one to watch.
 
not sure how news is released now, but it used to be the media got the release 15 minutes prior to write the byline.... then there was a countdown to 8:30:00 and it goes out all at once...

surely no one would leave their cell phone on to alert someone ahead of time.............
 
I noticed the markets received friday's low employment numbers as a suggestion of lower economic growth ahead and consequently a higher probability of a pause by the feds at their next meeting.

I tend to think the 75k number was misleading and didn't come from lack of employment opportunities, but from lack of qualified employees (to note the lower unemployment number).

With everything I see I figure the chances of a rate hike are 100%, even though the bond market is working with a 50/50 number.

I am a student of the markets, and relatively new to this business. If the bond market is wrong as suggested above, which would be the best way to profit from this scenario ?

Or am I missing something.....?

Thanks !
 
Quote from optionpro007:

I noticed the markets received friday's low employment numbers as a suggestion of lower economic growth ahead and consequently a higher probability of a pause by the feds at their next meeting.

I tend to think the 75k number was misleading and didn't come from lack of employment opportunities, but from lack of qualified employees (to note the lower unemployment number).

With everything I see I figure the chances of a rate hike are 100%, even though the bond market is working with a 50/50 number.

I am a student of the markets, and relatively new to this business. If the bond market is wrong as suggested above, which would be the best way to profit from this scenario ?

Or am I missing something.....?

Thanks !
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the first thing to know is government stats are not to be believed....

unemployment numbers are based in part on statistical models (birth - death) and do not count people who have given up looking for work....

so the numbers are now skewed to give cover to the Fed. to stop jacking up rates while making it appear the unemployment is low and those that are employed are seeing no gain in real wages....

the auto worker that got canned from his $80,000 per year job and is now delivering pizzas is considered "employed"

get the picture?

an opinion of course....
 
Best way to profit would be to short the 2yr note futures, Fed funds, or Eurodollars. I wouldn't necessarily short the long end outright, the curve should flatten if the Fed is on the table for June, so you will get better bang for your buck being short the front end of the curve. The reason for the curve to steepen would be if the Fed is near the end game and if long end traders do not feel confident the end of this monetary cycle has contained inflation. PIMCO is looking for the latter scenario as they are long the FOB (long 5yr short 30yr). I also think PIMCO may be long Swaption vol vs. short Treasury option vol as a play on the expansion of risk premiums, kind of different story.
 
^^^ Sound advice. If you're 100% sure the Fed is going to 5.25% on June 29, you want to be short July Fed Funds or Eurodollars or 2 years. Shorting bonds or notes would not be the way to play it. In fact, there is a pretty good chance that bonds would rally if the Fed goes this month.

Of course, unless you have inside info, I don't know how you could possibly be sure the Fed is going later this month. I'm thinking they pause this month, but include some strong wording in the statement about not hesitating to tighten if need be.
 
Quote from mcurto:

Best way to profit would be to short the 2yr note futures, Fed funds, or Eurodollars. I wouldn't necessarily short the long end outright, the curve should flatten if the Fed is on the table for June, so you will get better bang for your buck being short the front end of the curve. The reason for the curve to steepen would be if the Fed is near the end game and if long end traders do not feel confident the end of this monetary cycle has contained inflation. PIMCO is looking for the latter scenario as they are long the FOB (long 5yr short 30yr). I also think PIMCO may be long Swaption vol vs. short Treasury option vol as a play on the expansion of risk premiums, kind of different story.
More...

Exactly! and it's been a struggle I think for the Fed to slow the economy down while juggling inflation. The long end has been conflicted as of late because of this. And what's worse is they can't get their message straight, damned if they do, damned if they don't. If they raise, they'll push the curve steeper but still yields higher... if they pause, they look like softies on inflation...

Absolutely, if you wanna bet on the fed, bet large on the short end, although seems as though even the 2 year may be a little aggressive as of late... Betting against the "they will pause" crowd has been VERY profitable since the fed started raising in 2004. I think almost every single fed meeting has the S&P floating a couple points higher in the morning hours before the announcement, then straight down after the inevitable rate hike...

Remember the saying, don't fight the fed, you'll lose every time...
 
number had to be leaked or somebody took a huge bet and made out, exactly half the move of the whole day in my product happened in the 10 sec's before the number. bullshit.

'24 I believe is the 10 yr level associated w/ 5%....I believe friday it even settled higher than that, so 10 yr and FF going inverted? Thats almost reason enough (IMO) to be queu'd up to sell 10 yr's.
 
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