Bears Take Aim At Treasuries; Options Levels Soar

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In case you missed it, the WSJ is reporting that bearish options bets against popular U.S. government bond ETFs are at their highest levels in years.

That’s being taken as a sign that traders are growing cautious about the run-up in Treasury prices. It could also signal increasingly upbeat sentiment towards U.S. stocks.

The put-call ratio for the iShares Barclays 20+ Year Treasury Bond Fund (TLT) ended last week at the highest level in about two years, according to Trade Alert data. The figures reflect a greater proportion of traders looking to profit from declines in the ETF, the report noted, which rises and falls in line with U.S. Treasury prices.

Also, bullish trading has surged in the ProShares UltraShort 20+ Year Treasury ETF (TBT). The ETF takes a 200% inverse position in its underlying index tracking Treasuries. In other words, it bets that Treasuries will fall.

“Last week’s call buying in the TBT, alongside the put buying in the TLT, indicated that investors are positioning for a weakness in Treasurys,” Alison Edwards, derivatives-market intelligence analyst at Susquehanna Financial Group, remarked.

The inverse TBT as well as the long-only TLT are both trading flat today.