As the yield on 10-year Treasury notes dipped to a low of 3.85% last week, open interest in options hedging against such a move surged. This increase in demand for options contracts has led to higher premiums being paid on options targeting yields as low as 4% and 3.95%.

The recent spike in open interest in 10-year Treasury options is not limited to just these lower yield levels, however. In fact, open interest in the 113.50 strike and 114.00 strike saw significant increases as well, with a total of 168,696 contracts and 231,257 contracts, respectively. This represents a marked increase from just two weeks ago, when open interest in these strikes was significantly lower.

So what could be driving this sudden surge in demand for 10-year Treasury options? One possible explanation is that investors are becoming increasingly concerned about the potential for market volatility in light of recent economic indicators. With the yield on 10-year Treasury notes dipping to historic lows, it’s possible that investors are seeking to hedge against the risk of a potential yield move lower.

Another factor could be the upcoming expiration of options contracts on November 21. As these contracts approach their expiration date, investors may be scrambling to buy or sell options in order to take advantage of any potential price movements before the contracts expire. This increased activity in the options market could be contributing to the recent surge in open interest.

Regardless of the cause, it’s clear that there is a growing interest in 10-year Treasury options among investors. As the yield on these notes continues to fluctuate, it will be important to monitor the activity in this market and assess any potential implications for investors.