Treasury Bond ETF Options Trading Hits Record Highs
Investors are using fixed-income ETF options at record volumes to hedge against bond sell-offs as Treasury yields reach 20-year highs.
Traders are increasing their use of options tied to fixed-income ETFs at a record pace as yields on 10-year and 30-year Treasuries reach 20-year highs. BlackRock Inc. is seeing this surge primarily through its iShares 20+ Year Treasury Bond ETF (TLT), where trading volume has hit an all-time high on a 20-day average and open interest is nearing a record 13.55 million contracts. Similar trends are appearing in the firm's investment-grade (LQD) and high-yield (HYG) corporate bond ETFs.
Institutional and retail investors are utilizing these options to wager on rising yields or hedge against market sell-offs, as they offer a more efficient alternative to the underlying bond market. Retail traders using the Moomoo brokerage platform have specifically bet on further declines in TLT.
This shift includes a broadening investor base. Fund managers with equities-only mandates are now using these ETFs to manage interest-rate risk, while traditional equity investors are expanding their focus into rate-based derivative products to navigate the current volatility in the rates market.
