Supply weighs on bonds
May 29, 2024
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–Yields rose yesterday as 2 and 5 year auctions underwhelmed. 5y was 4.54 pre-auction but tailed over 1 bp with a result of 4.553%. Ten year yield up 7.4 bps to 4.54%. New high this morning in 10y JGB yield, over 1.10%. Contributing to weakness was buying of 26k each TYN 108.5/111.5 strangle for 45 and 108.5/111.5 strangle for 38-40. TYN4 108.5p has a delta of -0.47, settled 36, with a fall in open interest of 34k contracts. TYU4 settled 108-195.
–7 year auction today, followed by Beige Book.
–The weekend of May 18 I suggested that the GME pop and crash indicated a lack of firepower by spec ‘bros’. My thought was to short online betting companies, which I did by buying DraftKing puts. The thesis appeared to be working, but was helped along yesterday as Illinois proposed raising its sports betting tax, which is currently 15%, to as high as 40% on adjusted gross revenue of sports gaming companies. DKNG fell 10.3%. I’ll bet it goes lower.
–In an attempt to keep up with worldwide mayhem, there were 42 shootings, 10 fatally in Chicago over the Memorial Day weekend (included a 5 year old girl). The network news show I happened to be watching said there were 11 fatalities last year, so this year represents a drop of 9%. Feel better now?
https://chicago.suntimes.com/crime/2024/05/27/memorial-day-weekend-2024-continues-violent-trend-28-shot-7-killed
0QU 9575/9550ps vs 9563, 26k sold at 13.0
SFRZ4 9518.75/9543.75cs vs 9501, 13d 5.0 paid 15k
TYU4 105/112 rr vs 109-000, 34d 5k call sold flat
0QU 9575/9625/9650/9700c condor 10 paid 5k
Late,,,heavy buying TYN strangles
108.5/111.5 strangle 38-40 paid 26k
108.5/110.5 strangle 45 paid 26k
108.5p settle 0’36
110.5c settle 0’06
111.5c settle 0’02
