With the S&P 500 Index challenging new highs day after day, what is a bit perplexing is the continual bid that has appeared in U.S. Treasury bonds across various durations. On Thursday, the yield on the 10-year Treasury note dropped below 1.8% for the first time since December.

For one can look at iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT) — Expense Ratio 0.15% — for example, and note that the product is trading at its highest levels since late February of this year, and it has risen about 3.5% from its mid-March lows to current levels.

Typically in periods of unabated equity bullishness, we have seen treasuries sell-off hard, generally accompanied by heavy shorting activity either via put buying in TLT itself if not shorting the underlying ETF, and another popular trade has been outright call buying in TBT (ProShares UltraShort 20+ Year Treasury ETF, Expense Ratio 0.95%).

TBT, like TMV (Direxion Daily 20 Year Plus Treasury Bear 3X, Expense Ratio 0.95%) are structured as daily levered inverse products, have taken it on the chin recently, trading at their lowest levels in a month.

In the past several weeks, options flows have been downright quiet in both TLT and TBT given the steady rise of treasury bond prices (in lockstep with equity prices rallying), and the dichotomy between recent price trends of the two asset classes given what conventional thought would predict, is hard to ignore.

For, there has been no shortage of “Bond Bears” whom have been eager to get short treasuries (looking for lower bond prices and thus higher yields), especially predicting that institutional managers will wholesale make asset allocation changes away from bonds and into equities as conditions improve.

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