Mysterious funds are aggressively buying U.S. Treasury put options, betting that long-term bonds will break below historic lows next month.

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The U.S. Treasury bond market is accumulating a rare directional bet. Last Friday, as yields on 10-year and 30-year Treasury bonds surged, options trading linked to Treasuries saw unusually high volume, with large amounts of money flowing into put options, betting that long-term rates will continue to climb.

The most notable trade was a trader spending about $2 million to buy 15,000 June TLT ETF $75 strike price puts, betting that the fund will fall more than 11% by its June 17 expiration. If this trade materializes, TLT will drop to its lowest historical level since its inception in 2002. At the same time, another $3 million straddle option combination also attracted market attention, indicating that some institutional investors are reserving ample time windows for extreme bond market volatility.

These abnormal options moves occurred against a backdrop of multiple bearish factors—the previous week’s CPI data beat expectations, crude oil prices broke through $100 per barrel, and Fed Chair Powell’s term is about to expire. The triple pressure is driving global bond market uncertainty to sharply increase.

Option volume surged, bearish sentiment overwhelms bullish

Last Friday, options trading in the iShares 20+ Year Treasury Bond ETF (TLT), which tracks Treasuries with maturities over 20 years, reached more than triple the daily average for the past month, with bearish inclination particularly outstanding.

According to CNBC, about 1.4 million contracts were traded that day, of which about 380,000 put options traded at or above the asking price, indicating these contracts were most likely actively bought. By comparison, actively bought call options totaled less than 240,000. The ratio of bearish to bullish purchases was roughly 1.6 to 1, reflecting a clearly pessimistic outlook among market participants for the bond market.

TLT fund pricing has an inverse relationship to yields; buying puts is betting that bond prices will fall and yields will rise further. Last Friday, yields on both 10-year and 30-year Treasuries rose to their highest levels in over a year, directly triggering this round of options wagers.

Two large trades reveal extreme scenario bets

The two most watched trades that day represented sharply different risk appetites and trading logic.

In the first trade, a trader bought 15,000 June TLT $75 strike price puts at a total cost of about $2 million, betting the ETF will drop more than 11% from current levels before June 17 expiration. If realized, TLT will reach an historically low price since its 2002 inception, implying a sharp jump in long-term Treasury yields.

The second trade reflected a bet on extreme two-way volatility. Another trader bought 3,000 TLT $84 strike puts and 3,000 calls of the same strike, both expiring January 18, 2028, forming a straddle, totaling about $3 million. This combination would profit if TLT falls below $74 or rises above $94, showing this trader anticipates intense bond market volatility in the next two years, though with no clear directional bias and securing ample time to wait for the market to evolve.

Triple pressure drives bond market anxiety

This round of options abnormalities is not coincidental, but a concentrated reflection of intertwined macro pressures.

According to CNBC, last week’s CPI data exceeded expectations, reigniting concerns about the Fed’s policy path amid inflation. Meanwhile, crude oil prices broke through $100 per barrel, further strengthening expectations of persistent high inflation and weighing on the bond market.

Furthermore, Fed Chair Powell’s term is about to expire, and his successor’s monetary policy stance remains uncertain, complicating the market’s judgment of future rates. These triple factors combined are driving expectations of global bond market volatility higher, and last Friday’s exceptional options volume directly mirrors this heightened tension.

Risk Warning and DisclaimerThe market has risks, investment needs caution. This article does not constitute personal investment advice, nor does it take into account individual investors’ specific goals, financial situations or needs. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Investing based on this article is at your own risk. ```