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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (23928)	8/26/1999 11:04:00 PM
From: Les H	Read Replies (1) \| Respond to of 99985

US DEBT OPTIONS: BOND PUT/CALL RATIOS REFLECT BULL SENTIMENT CHICAGO (MktNews) - Although flows in Treasury bond options were two-way Thursday, one market expert says recent trading trends in the options pits echoes the market's new bullish outlook. Sep T-bond futures consolidated a bit in early trade Thursday, but held the majority of the gains made during the previous session. The benchmark 30-year bond finished the day 1/32 higher at 116-19, establishing a new one-month high settlement price. Tony Crescenzi, director of fixed income trading at Miller, Tabak and Hirsch in New York, said recent flows in T-bond options "reflect a swing in sentiment." Two weeks ago, short-term sentiment was near a bearish extreme, he said. The 10-day put/call ratio was near its high for the year at 1.16-to-1, reflecting more puts traded than calls. At that time, bullish consensus reported by various services was near two year lows, and the Commodity Future Trading Commission reported speculative accounts were heavily short Treasury bond futures, Crescenzi pointed out. Since the Fed's Tuesday 25-basis-point hike in both the federal funds and discount rate hike, put/call ratios been .6 to 1, as players turned active buyers of calls, he said. After Wednesday's trading session, the Oct T-bond put/call ratio was .5-to-1, while Dec T-bond ratio was .74-to-1, the result of heavy buying of Oct and Dec 118 calls. That sentiment continued into Thursday's trading session, although dealer flows were two-way. Dealers continued to be better buyers of Oct and Dec T-bond 118 calls, and Dec T-bond 120 calls, sources said. In addition, sources report good dealer interest in the Dec T-bond 112 puts as two dealers bought a total of 4,000 contracts early in the session. Pit sources also reported a dealer sold a large block of Dec T-bond 110/120 strangles -- now up to a weekly total of 7,000 sold. Sources linked this to a West Coast money manager who has been known to sell yield-enhancing option premium since spring. Traders say the fund has accumulated a large short base in the Dec strangle over several weeks. Amid the two-way flows, implied volatility on T-bond options was mixed, with the Oct T-bond options gaining .07% to 8.53%, while the longer-dated Dec T-bond volatility held firm at 8.84%. The Chicago Board of Trade estimated Thursday's volume in T-bond futures at 440,000, down from Wednesday's actual of 561,994. Bond options were estimated at 105,000, compared with 162,764 traded during the previous session.--Alyce Andres; email: aandres@mktnews.com.