Bond traders made massive bets that bonds will rally. This is news because bond traders have been catastrophically wrong about bonds for two straight years.
The options market shows huge positioning for a bond rally. Positioning is what traders call hope when they want it to sound strategic.
These are the same people who said inflation was transitory. Then said it wasn't transitory but bonds would rally anyway. Then said bonds would rally once the Fed stopped hiking. Then said bonds would rally once the Fed started cutting. The Fed cut rates and bonds sold off.
Now they're betting on a bond rally again. With options. Which expire. So they've added a countdown timer to being wrong.
The adage goes: Stocks float on a sea of bonds. Poetic. Except when bond yields rip higher and stocks go up anyway because nobody understands anything anymore and the correlations that worked for forty years stopped working the moment your cousin bought a Treasury ETF.
Options positioning means nothing. It's a survey of people who are already underwater asking each other which way is up. Massive bets in the options market just means massive premiums got paid to someone smarter who sold them the dream.
Bond rout ending? Sure. Right after this next CPI print. Or the one after that. Or maybe when the Treasury announces it's issuing another trillion in debt this quarter because the government spent your tax refund on interest payments to China.
The tide is going out, they say. The tide has been going out since 2021. These traders are standing on the beach wondering why they're still dry while their portfolios are three miles offshore.
Retail bought bond funds at the top because their advisor said bonds were safe. Now the smart money is buying bond calls because they think they've found the bottom. The bottom is wherever these people finally give up.
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