As Bonds Slide, Here’s A Look At The Behind The Scenes Action

Ok, look: bonds are under some notable pressure on Tuesday.

Clearly, some of that’s tied to the Fed and uncertainty about whether we will or won’t know anything more tomorrow than we know today about balance sheet normalization.

But you also have to put this in the context of the German Ifo print which set the tone early this morning and of course the risk-on sentiment in equities occasioned by earnings beats (whatever ‘beats’ means these days) from several bellwethers.

And then, if you just scan the tape, there are all kinds of notable trades.

First of all, here’s 10Y yields:

And here’s the 30Y:

And here’s bund yields on the day:

Ok, but again, there’s some notable background action here which I suppose you can write off as inconsequential or otherwise not interesting if you want, but on the off chance you care, just scan this brief bullet point summary via Bloomberg and make of it what you will:

• TYU7 12,792 trade at 126-00+, executed at 10:03am London time, CME data show
  • Block is equivalent to around $1m dv01
• Block sale in 10Y futures appears to partially unwind a $2.9m/DV01 position established via blocks last week.
  • Tuesday’s 12,792 10Y futures block sale amounted to $1m/DV01, suggesting there may be ~$1.9m/DV01 to come
  • $2.9m/DV01 TY position was established via $1.9m/DV01 buy (23,865 TYU7 contracts at 125-29) July 18 and $940k/DV01 block buy (11,885 TYU7 at 126-03+) July 20
•  Bund/UST 10y spread 1bp wider after two large block trades in futures.
  • 10y bund RXU7 7,221 at 162.13 vs bond block USU7 5,200 at 153-13, both are executed at 1.43pm London time, according data from Eurex and CME
    • Bund futures rose, while Treasury futures slid to day’s lows
    • Duration weightings are imperfect at $1.07m/dv01 vs EU1.07/dv01; however, once adjusted for currency, this equates to $1.07m/dv01 vs $1.24m/dv01
• Treasuries extend losses following familiar block trade in 10Y futures; latest block of 5,096 contracts equates to $400k/DV01, suggests program active since May 31 is setting fresh short, having squared off Monday.
  • 5,096 TYU7 blocked at 125-22+, 10:05am ET, seller, according to New York trader
  • Up to Tuesday, short-setting program appears to have cumulative net gain of 31.5 ticks, which on blocks of ~5,100 amounts to around $5m
  • Latest block suggests the program is again $400k/DV01 short
  • Update to program is as follows:
    • 07/25 10:05:54 5,096 125-22+ BT (seller) short $400k/DV01
    • 07/24 11:22:00 5,013 126-06 BT (buyer) flat
    • 07/21 13:10:00 5,069 126-11 BT (seller) short $400k/DV01
    • 07/14 12:32:00 5,100 125-20 BT (buyer) flat
    • 07/14 11:11:59 5,100 125-22 BT (seller) short $400k/DV01
    • 07/13 11:51:00 5,100 125-09 BT (buyer) flat
    • 07/13 10:57:00 5,100 125-11+ BT (buyer) short $400k/DV01
    • 07/12 15:52:35 5,100 125-18+ BT (seller) short $800k/DV01
    • 07/11 12:53:21 5,100 125-06 BT (seller) short $400k/DV01
    • 06/30 10:50:00 5,100 125-22+ BT (buyer) flat
    • 05/31 15:02:00 5,100 126-08+ BT (seller) short $400k/DV01