Treasury Options Show Biggest Worries Since 2021 ‘Flash Crash’

The growing unease around US assets that has sparked a selloff in long-term government bonds and sent yields soaring is showing up in the options market, where premiums to protect against even bigger losses are at their highest since the “flash crash” of 2021.

The so-called option skew on Treasury bonds has blown out considerably, with investors aggressively driving up the price of puts that hedge against the risk of a yield spike relative to call options that would profit from the opposite. The last time the skew was favoring puts this much was Feb. 25, 2021 — the day of an unusual “flash” event in US Treasury markets that featured a sudden drop in prices amid strained liquidity conditions.