hey mcurto... It looks like the sizes shown on the screen in 5yr treasuries (over the last few days) seems larger than normal. Is this because of the new priority algorithm being used? http://www.cbot.com/cbot/pub/cont_detail/0,3206,1123+39391,00.html
Yep, new algorithm is the reason. I'm not sure why they decided to do this??? Maybe the 2 year but the 5 year? The daily volume in the 5yr was doing quite well. If it ain't broke, why fix it? I guess the big money traders (those who can afford to fluff up the bids and offers to ridiculous amounts to get fills) have a strong influence on the CBOT executive committee.
Quarterly expiration isn't until late August, so doubtful that is playing any role in this move higher. I think a lot of it is mortgage buying, this volatility kills those guys and they have to become active. Contract lows last week and now levels on the upside we haven't seen for weeks, they continued to roll into the Sep 106 calls today, about 25,000 between the two. As for the 5yr, funny you guys ask, one of the guys behind my booth fills for probably some of the biggest 5yr futures customers out there. His customers did not want the switch to algorithm. In fact, the CBOT did a customer survey and it was essentially 50/50 for yes/no. Unfortunately, part of that 50% is one of your bigger 2yr and 5yr locals (part of a spread group, starting with a T, can probably guess). Today the guy behind me was working 500 at 13 in the 2yr, it was 12.75 bid for 26,000. Of course the 26,000 that were bid don't cause the 13's to trade, and then when the 12.75 traded about 500 times 20,000 pulled off the bid. It is one guy with a lot of influence and seat ownership, so it will be tough to get them to switch back. The CBOT employee literally had no argument for why algorith is better, they now created a full tick wide monster that is 20,000 up. That bulletin is BS, none of the banks wanted this to go through.
Also, bonds failed to make substantial gains yesterday (Monday) while conditions where perfect for a rally.
The old 5yr was a half tick wide market most of the time about 3000 bid and 3000 offered. Now the 5yr is really a 1 full tick market 20,000 bid and offered with the half tick in between basically a choice market, meaning one can usually buy or sell 1000 or so, maybe 2000, at that level, without moving it much. The CBOT employee just stammered around when the guys asked him why a full tick market is any better.
Hello, I've been trading the entire curve (5s, 10s & Bonds) for more than 2 years now... Was wondering if some of you are also fincls scalpers ? I'm trading strictly off S&R levels and price actions ! ... Regards, Boom
Yes, mainly the 10yr but more of a position scalper. I will trade small scalps if I don't have a great feel for the overall direction or if we are in no man's land in terms of levels. More often than not though I look for a general position to trade around which means some days price action is terrible and will go without making one trade. I try to keep it really small (1/5th and even 1/10th normal size) when I don't have a great feel and then try to hit the home run when the time is right. Mainly scalping and position trading off options and cash flows, along with some of the pit paper that is still on the floor. I look at technicals but don't use them to enter and exit trades, mostly weekly/monthly volume charts to see where stops will be located and thin air levels.
One would normally think that bonds erased early losses yesterday because stocks were falling and bonds had to go up, but looking accross maturities it looked like long-term bonds and not the short end was responsible for the afternoon rally. This means that a boost of popularity for the dollar is what made bonds go up instead of anticipations of lower interest rates created by falling stocks. With oil and gold on a solid uptrend, the popularity enjoyed by the dollar this week is probably short lived.