Options traders continue to step up their bearish bets against Treasury exchange traded funds despite the move lower in yields the past two days, which has pushed bond prices higher.
Traders have been using Treasury ETFs for weeks to position for falling bond prices. For example, put buyers have surfaced in iShares Barclays 20+ Year Treasury Bond Fund (NYSEArca: TLT). [Chart of the Day: Short ETFs for Treasuries]
Also, Treasury bears have snapped up call options in ProShares UltraShort 20+ Year Treasury Bond (NYSEArca: TBT), says Paul Weisbruch, head of ETF/options sales and trading at Street One Financial.
“On the fixed-income front, options trading remains very active in longer dated U.S. Treasury Bond products, as TBT calls traded more than 155,000 contracts yesterday, and TLT put volumes remained elevated as well,” Weisbruch wrote in a strategy note Thursday. [Options Traders Bet on Higher Bond Yields with Short ETFs]
“The long bond managed a significant reversal and ‘gap up’ yesterday as equities were lower across the board throughout the session, as this is the second time in recent weeks that TLT has found support on its 200-day moving average,” he added. With U.S. stocks weak Thursday, “longer dated U.S. Treasury bonds seem to be catching a bid once more.” [Is It Finally Time to Short Treasuries with ETFs?]
TLT was down about 7% year to date heading into Thursday’s trade.
The Treasury ETF is about flat for the week but traders are clearly positioning for more downside in bonds, and higher yields.
iShares Barclays 20+ Year Treasury Bond Fund