Treasuries tumble, and traders are betting on more



The Georgia election results weren't received warmly by bond investors, who decided to sell first...and aggressively.

Futures traders are a bit sanguine, with speculators holding a minor net long position as of last week. Options traders, however, have seemingly been significantly more worried.

On Tuesday and Wednesday alone, more than 1 million puts traded on 10-year Treasuries. On Tuesday, there were over 4 puts traded for every call, the highest Put/Call Ratio in more than 5 years. Put volume has been heavy for weeks, so the 20-day average of the ratio has soared to nearly a record high, just below the peak from late 2013. 

Treasury put/call ratio

Other times when traders focused on puts over calls by more than a 2-to-1 ratio has preceded just-okay returns per our Backtest Engine. Returns were better for the TLT fund when the ratio was high, with 94% of days showing a positive return 3 months later.


What else is happening

These are topics we explored in our most recent research. For immediate access with no obligation, sign up for a 30-day free trial now.

  • Results in 10-year Treasuries and the TLT fund after high put/call ratios
  • Institutional investors have shifted to a heavy short position in this market
  • Hedge funds have gone net short, too
  • Even so, implied volatility in the bond market is at historic lows
  • Seasonality for the 10-year is modestly positive at the start of a New Year
  • What happens to Treasury prices when economic activity picks up
  • Basic material stocks had quite a day on Wednesday
  • There has been another historic surge in securities hitting 52-week highs
  • What happened when other notables reached the "world's richest" moniker

Stat Box

On Thursday, more than 14% of securities on the Nasdaq exchange ticked at a 52-week high. That's the highest percentage of new highs in more than 700 days, one of the longest streaks in 35 years.

Sentiment from other perspectives

We don't necessarily agree with everything posted here - some of our work might directly contradict it - but it's often worth knowing what others are watching.

1. About 54% of mom-and-pop investors expect stocks to keep rising in the months ahead, the 2nd-highest percentage in the past 3 years. [AAII]

aaii sentiment survey

2. When you're bullish, you gotta buy call options...right? [Bloomberg TV]

call option volume

3. There are just no words. [Axios via Daily Shot]

bitcoin tesla market value

The post titled Treasuries tumble, and traders are betting on more was originally published as on SentimenTrader.com on 2021-01-08.

At SentimenTrader.com, our service is not focused on market timing per se, but rather risk management. That may be a distinction without a difference, but it's how we approach the markets. We study signs that suggest it is time to raise or lower market exposure as a function of risk relative to probable reward. It is all about risk-adjusted expectations given existing evidence. Learn more about our service , research, models and indicators.


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