Long end concerns
December 5, 2025
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–Rate contracts now have very bearish chart set-ups. Quite clear on TLT chart…H&S top. Price 88.53, right at the 200DMA 88.41. A break below that projects to 84.50/84.60. Could get ugly quick. The only reasons I don’t have super-high conviction is that implied vol is being pressed lower (in TY), and volumes aren’t great. Below 88.40 I would expect those two factors to change.
–Though it wasn’t a particularly active session, there were a few themes: Call buying in SOFR. Steeper SOFR curve. Higher rates across the board.
–First, call buying in SOFR. For example, a buyer adding to longs in SFRH6 9662.5c through SFRH6 9662.5/9681.25 c 2×1, paying 8.25 to 8.5. SFRH6 9662.5c settled 5.25 with open interest up 55k. H6 9681.25c settled 2.75 (so pkg 7.75s).
–There were a couple of SFRU6/U7 synthetic steepeners, +U6 9800c vs -0QU 9800c for 0 to 0.25. (+SFRU6 9800c). Also, buyer of 40k SFRU6 9700/9750cs vs sold 0QU 9700/9750cs, taking a credit of 3.25 20k. SFRU6 cs settled 10.0 vs 9682.5. 0QU6 cs settled 13.0 vs 9687. So SFRU6/U7 spread settled -4.5 (early seller in the sprd at -5.5). The option trade is synthetically long the calendar, which has curve roll as a stiff headwind; M6/M7 is -23. However, the premium credit is a small cushion, and if something blows up and forces the perception of a more aggressive Fed (like SVB), then a trade like this works.
Seller of 17k TYF 112.5/113.25 strangle at 43. Buyer of 20k TYH6 115c cov 112-265, 20d, paid 20. TYF 112p covered 112-235 with 19d, seller of 8k at 13. Finally a bottom fisher buyer 10k TYF 113/113.5 strangle 56 covered 112-22. Followed by a seller of 1400 BLOCKED UXYF 114/116.5 strangle at 25. (Rarely ever see UXY options trade).
–10y yield +5.4 at 4.11% with TYH6 -12.5 at 112-23. 30y yield +4.3 to 4.767. Jan treasury options expire in three weeks, on 26-Dec.
–I continue to see news clips and X posts about Oracle CDS, so here’s a chart:
