From New York, traders have been looking east for at least some level of inspiration from Turkish market volatility.  As we've discussed exhaustively, however, that's far from the only game in town.  Today brings fresh evidence.

In looking east this morning, traders passed right over Turkey and continued on to China, where a sharp move lower in equities futures drove a moderately big sell-off in US equities futures.  Bonds picked up some "risk-off" demand as a result, and that ultimately proved to be a good defense against a stronger Retail Sales number this morning.

As the chart points out, there was a staggeringly big flattener trade just before Retail Sales.  This one was actually reported on the CME's block trade screen, so there's no guesswork.  Simply put, a big trader made a big bet on 2yr yields continuing to rise versus 10yr yields (or 10s falling vs 2s, if you prefer).

To quantify just how "big" this is, consider that 2yr futures contracts are worth $200k each.  So that's an $8.8 bln sale of 2's.  Granted, it's offset, somewhat, by the big buying in 10yr futures, but contracts there are only $100k, so that's a measly $2.29bln in 10yr buying.  Incidentally, this same trader was making these same bets on Monday (at least we assume so based on the almost identical amounts).

What does it mean for us?  Not too terribly much, considering a flattening curve is widely assumed.  If the buy/sell amounts were a bit closer to each other, it could connote better buying in 10yr Treasuries, but as it sits, this is more of a bet AGAINST 2yr notes than it is a bet in favor of 10yr notes.  Definitely not hurting though...

The net effect on the bigger picture (of today's general strength so far) is that bonds get another chance to stay inside July's sideways range.