Commodity Investment Advisors (CTAs) have recently been positioned as “maximum short” from a tactical standpoint, but futures data suggests an unwinding may be underway. This leaves U.S. Treasuries exposed to short-term upside risk from short covering.
Hedge funds, CTAs and other leveraged funds are unwinding net short positions across Treasury futures at an aggressive pace, according to positioning data from the U.S. Commodity Futures Trading Commission (CFTC) through Wednesday. The net short in terms of 10-year bond futures is currently about 6.7 million contracts, compared to about 7.2 million contracts at the peak in January.
Interest rate trends reflected in swaps scheduled for Federal Open Market Committee (FOMC) meetings are moving closer to the expectations of its members, who expect three rate cuts this year. Because of this, front-end sales may hit a small barrier.
Some 500,000 positions in 10-year Treasury futures have been unwound in recent weeks, raising questions about whether this is a signal that demand for basis-traded positions is waning. are doing.
Signals from short positions in the futures market have never been so divergent from the spot market. While the number of outright short positions remains at its lowest level since 2012, the number of long positions has actually increased, moving from neutral to neutral, according to a JPMorgan Chase Treasury customer survey released on Tuesday. It’s off.
Original title:Short Cover Risk Seen in Bonds as Market Pricing Nears Fed Dots(excerpt)
2024-02-28 04:16:26
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