Put options increased significantly, with traders betting on a surge in U.S. bond yields

On September 5, the well-known financial blog ZeroHedge published an article stating that despite the poor performance of the JOLTS employment report, the market seemed to have misjudged its importance, mistakenly equating a lagging employment report with the latest data to be released. The JOLTS report usually lags behind the non-farm payrolls data by one month, and with the frequent revisions to the data recently, the U.S. Bureau of Labor Statistics may once again create a "stronger labor market" by adjusting the data. In any case, the Federal Reserve may cut interest rates by 25 basis points in September to meet the political need to show a "strong economy" two months before the election.

Last week, ZeroHedge predicted on the social platform:

Anyone expecting a weak payrolls report next week will be sorely disappointed: that’s why there were previous downward revisions. Now, the Bureau of Labor Statistics (BLS) will continue to manipulate data or adjust targets to make the economy look “as strong as possible” two months before the election.

It said that once the employment data released on Friday is "hot", the market will immediately reverse the "economic hard landing" expectations adopted in the past few days and cause U.S. bond yields to soar. ZeroHedge added that the number of new non-agricultural jobs in August may reach 200,000, higher than the market's general expectation of 165,000 and higher than 114,000 in July. The expectation of a hard landing of the economy has once raised the possibility of a 50 basis point interest rate cut in September to 50%.

The market seems to have a consensus on this. Edward Bolingbroke, a short-term interest rate expert at Bloomberg, pointed out that demand for put options on the 10-year Treasury note increased significantly in early trading on Wednesday, with some investors betting that U.S. bond yields would rise to 4.05% on Friday. Some traders have invested millions of dollars, betting that U.S. Treasury yields will soar in the next 48 hours.

The main risk event in the options market this time is Friday's non-farm payrolls report. In other words, some people are betting that the report will be strong, pushing the 10-year Treasury yield up sharply by 25 basis points.

Although most investment banks still hold a "dovish" stance, some sell-side institutions expect large-scale long liquidation after the release of the employment report. Citi strategists previously recommended a short position in 10-year U.S. Treasuries, believing that if the employment data meets expectations, interest rates will rise because "there has been no significant deterioration in the labor market."

ZeroHedge said that whether it was in response to political demands of the election or the result of capital flows, at least one trader bet millions of dollars that the non-farm payrolls data would drive U.S. Treasury yields soaring.