Bond rally nearing an end?

To add to my previous post. Just took a good look at the 90-day and the 10-year. It looks like things are about to get serious.

All rates bottomed in June 2003. The T-bill and 10-yr, at that point, started their bull market in rates. The 30-yr did not! T-bills have been on a tear, obviously: rising from 0.81% to 4.45%.

The 10-yr rallied at first, corrected, rallied again, corrected and looks as if it has been in a trading range between: 3.89% and 4.657% for quite a while. Within that trading range, however, the low being 3.89% June 2005, it has been constructing two smaller impulse waves higher. Exactly like the 30-yr, which bottomed, ending its bear market in June 2005. Now we have the 10-yr and the 30-yr in sync!

Coming off the June 2005 low, I see two small impulse waves, overlapping each other (a subdivision), and the recent low a week or so ago, aligned the 10-yr and 30-yr up perfectly. With the two terms now in sync and possibly entering a third wave, rates could rise in a dramatically short period of time. Over the next several weeks 4.87% 10-yr should be easily obtainable.
 
100k contracts at >$1.5MM per tick on the strangle, not including their vegas which are tremendous. It's not as simple as selling some notes within a handle of the strike. They accumulate a ton of deltas through the upside curvature. They could easily lose 20mil on vega alone. It's academic, as the loss would be but a blip based upon AUM.
 
Quote from gharghur2:

Nice report...staying short as well. I think today was just a micro 4th wave, rates should move to higher highs monday or tuesday.

Tony
More...

hit the 'higher' this morning!
seeing some divergences on the hourly's
slight pullback until after the auction?
 
Bonds do look very beaten down after the last few days. I was short 2 10-year bonds from 109250 and covered today one contract at 108140. I lowered my stop on the last contract to 108250. I am just not sure what will happen tommorrow so I decided to play it safe.

Regards,
Steve
 
Steve,

Never wrong taking a profit
See five waves up on the hourly charts, and a negative divergence short term. Maybe a short term pullback is in order.
Staying short for the duration of the entire wave.

Tony
 
I did something similar Thursday afternoon, last week, when I wrote 110 puts to convert my outright bearish position into a 114-110 bearish spread. I plan on buying back those puts I at a lower price in a week and get back into an outright bearish position with my old 114 puts.
 
Steve, you are not alone in buying 30yr puts, you have the Japanese on your side. A large Asian account (believed to be for Nomura) purchased about 15,000 March 112 puts last week from 21 to 26 ticks and today bought 10,000 March 111 puts for 27 ticks. This whole large down move started when the Asian accounts began to buy puts before their holidays and fiscal year ends (generally lower participation from them in January). Would imagine they are protecting long futures/cash positions with these options.
 
You must log in or register to reply here.
Back
Top