Summary: Options market flow this week included two substantial August put transactions tied to the 10-year Treasury that imply expectations for higher yields by late July. The trades - executed on consecutive days and expiring one week before the Federal Reserve’s July 29 policy announcement - target yield levels roughly 20 basis points above current rates.
On Wednesday, a single buyer purchased August 108.00 puts on the 10-year note at 23 ticks, paying a premium that amounted to $15 million. That 108.00 strike corresponds to a 10-year yield of about 4.7%. Following that transaction, open interest at the 108.00 strike rose by 41,580 contracts, a change market observers interpret as the buyer establishing new risk in the options market.
Less than 24 hours later on Thursday, shortly before the weekly U.S. jobless claims print at 8:30 a.m. New York time, another buyer acquired 12,155 August 108.50 puts on the U.S. 10-year at 25 ticks, paying approximately $5 million in premium. The 108.50 strike maps to a 10-year yield near 4.65%.
The directional intent of the Thursday trade is not definitive. As of Wednesday’s close, open interest at the 108.50 strike stood at 86,052 contracts, leaving open the possibility that the transaction represented either a new bearish position betting on higher yields or activity connected to short-covering.
Both August put purchases target yields roughly 20 basis points above prevailing levels and will expire on July 24 - exactly one week before the Federal Reserve’s scheduled policy announcement on July 29. The timing places the contracts squarely in the window where rate expectations can shift in response to macro data and central bank guidance.
Market participants will watch how these positions evolve into expiration and how price action in Treasuries responds as the Fed meeting approaches. The size of the premiums and the changes in open interest in the August strikes highlight the scale of the bets and the uncertainty priced into the market for the remainder of July.
Key points
- Two large August put purchases imply 10-year Treasury yields near 4.65%-4.7% by late July.
- Wednesday’s 108.00-purchase paid $15 million in premium and raised open interest by 41,580 contracts, signaling new market risk.
- Thursday’s 108.50 purchase involved 12,155 contracts for about $5 million; its intent is unclear due to existing open interest at that strike.
Sectors affected
- U.S. Treasury and wider fixed-income markets.
- Interest-rate sensitive sectors and assets that respond to yield movements.
Risks and uncertainties
- The direction of the Thursday transaction is ambiguous - high open interest at the 108.50 strike makes it unclear whether the trade was new bearish positioning or short-covering; this ambiguity affects interpretation of market sentiment for yields.
- Both August options expire on July 24, one week before the Fed’s July 29 policy announcement - developments between those dates could materially alter the positions’ value.
- Trades target yields about 20 basis points higher than current levels, and actual yield movements may differ from what the options positions imply.