March 30. Sentiment towards bonds falling as fast as consumer confidence

–There has been a tremendous amount of put buying in the past few days.  Yesterday the Green April E2J 9725/9700p spd (on EDM13) bought in size of 40k for 4.  Midcurve June (on EDM12) puts rose 52k in open interest.  There is a lot of weight on the market, and the down trade in bonds doesn’t feel like it’s over even though tens should have a bit of support around 3.5% yield.  There was also notable put buying in tens, though a  seller of 10k TYM 117/122 strangles down to 53.  Of course, if this is a big bond fund now devoid of treasuries, he may be considering the trade like my old friend Andy Totman: would you like to own tens at 117 with an extra 53/64s?  Just take delivery if it goes through you.
–ADP report and 7 year auction today, along with several Fed speakers.
–I’m not sure if this move is more representative of economic growth, or inflation concerns, or if it is more insidiously associated with lack of confidence in sovereign bonds.  I saw a news item that said Irish “stress tests” may lead to government control over banks.  Perhaps the wording should be changed, because it appears to me that the gov’t is held hostage by the banks, the taxpayers are on the hook already.
–I don’t know much about the situation in Japan, but the word plutonium seems to be popping up a lot more. After the tremendous repatriation, yen is right back at pre-tsunami level.  EUR/JPY at new high.  Perhaps the concerted intervention was the best timed I have ever seen.

Posted on March 30, 2011 at 5:05 am by alexmanzara · Permalink
In: Eurodollar Options

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