Trading in these two ETFs suggests inflation fears are overblown
Federal Reserve Governor Kevin Warsh watches his first news conference since taking over as head of the central bank on June 17, 2026, in Washington, D.C.
Chip Somodevilla | Getty Images
It would have been a big week for bond bears if it weren’t for crude oil.
US GDP came in above expectations, and the Fed’s preferred inflation gauge was at its highest reading since October 2023. 10 year return It fell below 4.4% and iShares long-term bond ETF (TLT) It rose two-thirds percent, continuing its 5 percent rise since last month’s low.
One explanation for this is a sharp decline in oil prices. crude futures It’s down nearly $10 from last Friday’s high; This reduces the risk of high inflation and hawkish central banks.
“It’s definitely bearish and the curve has flattened a little bit,” Phil Streible, chief market strategist at Blue Line Futures, said in a phone interview. “I don’t see oil in the 50s, but it could ease into the 60-65 range.”
Judging by the option flows on the oil ETF (USO)More relief may be on the way. According to ThinkOrSwim data, there were approximately 30% more puts than calls on Friday, with puts being the least popular directional trade. According to SpotGamma data, $81 million of the $114 million premium traded in the fund was tied to calls.
If oil prices remain low, the specter of a hawkish Fed may fade, led by Kevin Warsh, who told reporters earlier this month that the central bank would spend more time developing internal task forces rather than publicly speculating on the direction of interest rates.
iShares 20+ Year Treasury Bond ETF (TLT), YTD
There were more puts than calls in the TLT ETF on Friday, but the most prevalent trade in terms of volume was puts. One of the largest trades of the day was the simultaneous sale of both 11,000 80-strike puts and 44,000 55-strike puts, which brought in approximately $2.6 million. Of the $51 million traded on TLT, $30 million was tied to sales transactions.
“We’ve probably seen the peak in CPI inflation and when Warsh sees inflation coming down, I think they’re going from hawkish to neutral or maybe dovish,” Streible said.
