Volatility is in the bonds!

Well… not really.  60 day IV is at a 1 year low for TLT as shown on the Livevol chart below.  And yet I can’t help but think the recent rally in bond prices is some reflection of market worry.  Let’s call it Shadow Volatility.  With the Fed raising and getting ready to dump their rather large block of securities you would think TLT and longer duration bonds would be softer but this is not the case.  Something else is afoot.

Bond short covering, maybe?  New DJT investigation or the big tech wreck, maybe and maybe?   Maybe it is just the fact that rates are going to stay stable and climb slightly, at least according to the Fed. The bid for US Gov bonds looks more like a flight to safety in a world with a dearth of bargains and more uncertainty with the Trump Agenda coming to fruition.

LivevolX for Lightspeed

The trade

I like long strangles in TLT in the Jul cycle but with a very short hold time if we don’t see a move soon.  TLT is in a strange place on low IV and normally that makes me a buyer of juice. 

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