Bond rally nearing an end?
- Thread starter gharghur2
- Start date
August 105 calls traded a boatload on the screen today, about 40,000 lots total when everything was said and done. I talked to a local from a fairly good-sized screen MM group and he said the paper was both ways. I'd assume some of that was Wells Fargo convexity hedging (buying) as we downticked, but probably not more than 15,000 or 20,000 (they were long the 106 and did a 1x2 rolling into the long 105 yesterday). The next 20,000 may have been dealers creating synthetic puts by buying calls and selling futures at a 1:1 ratio (heard that scenario from a different screen MM) on the way down. A lot cheaper to create synthetic puts than buy the August 104 puts outright. But I'm not completely sure about the second scenario, have never really seen dealers do synthetic type stuff as of late. The long end will be pushed until some real money type accounts become active in BIGGER size, they are testing the waters, but not enough to stop the move.
It has been 6 months since the start of this thread. Is the bond sell off nearing an end?
If you look at the LONG term picture, the monthly chart pattern for the CBOT Sep06 30YR. made a high in Jun03 around 124 (pt1), a low in May 04 around 103 (pt2) , in high in June05 around 120 (pt3), so if the patern is to follow, the low should of been Mays06 low around 105 (pt 4 ??)
Simple s/r lines I know, but sometimes they hold true
Simple s/r lines I know, but sometimes they hold true
mcurto,
What is your impression of the 105 12 area in the SEP ZB? Think we'll see it before the end of the week?
John
What is your impression of the 105 12 area in the SEP ZB? Think we'll see it before the end of the week?
John
That level in the 30yr is seen as minor support heading into the FOMC. Caution that dealers are starting to see the 2yr as somewhat cheap even ahead of the auction tomorrow, so seem to be leaning toward steepening trades, which does not benefit holding a long position in the long end of the curve. A decent sized hedge fund is long about 15,000 plus of the Sep 105 30yr puts and continues to add, so maybe we get there by the end of the week.
Are these puts still there?
Funny you ask, the guy who is long them quoted them today and I believe with futures below 106-20 they were 38 bid at 40. This fund does this every single time, they never get out at a profit, at one point he was at a 20 tick winner on these puts with futures obviously more than 1 point lower, but never pulled the trigger. If anyone was watching 10yr futures on the screen the last hour they may have noticed 1800 lot chunks every few minutes in the time and sales, EDF Man must have bought at least 20,000 between the pit and the screen (4,000 only in the pit) in the last 1.5 hours of the day. Their internal hedge fund black box has been short all year (probably at least 50,000 contracts maybe 100,000), so maybe covering month-end and quarter-end, booking some profits. Wouldn't be surprised if this guy gets short again next week.