Treasury Option Action: some "call fly" demand
Treasury Option Action: some "call fly" demand has been spotted on 10-year futures, with dealer buying of December 125.50/126.50/127.50 call butterflies "in good size," according to sources. This involves a purchase of 25k in 125.50s/ sale of 50k in 126.50s/ and purchase of 25k in 127.50s. The bullish bet stands in contrast to recent mostly bearish put strategies and targets a lunge towards 2.05% in cash yield terms from 2.37% presently. With the ECB and BoJ likely to continue leaning to the dovish side this week and the Fed seen on hold next week, this might not be a bad strategy with the call fly looking "cheap" in terms of vol. December 10s are currently 5-ticks higher near 124.315, compared to their 125.00-124.23 session range.