Hedge funds in historic double-down on higher U.S. yields - Jamie McGeever
Not only are hedge funds ramping up their bets on a higher 10-year U.S. Treasury yield, they are doing so on a historic scale.
The latest move in Commodity Futures Trading Commission positions suggests speculators were undeterred by the market’s reaction to Federal Reserve Chair Jerome Powell’s Jackson Hole speech, or were banking on a bumper August U.S. jobs report.
In the week to Tuesday, Aug. 31, funds and speculators flipped their position in 10-year futures to a net short 29,819 contracts from a net long 113,312 contracts the week before.
This marks the first net short in eight weeks. But more significantly, the position shift of 143,131 contracts marked the biggest weekly swing against Treasuries in three years, and the seventh biggest ever.
Funds also accelerated their selling of 2-year Treasury futures, swelling their net short position to 20,750 contracts from 9,366 the week before. That is light positioning, historically, but still the heaviest bet on higher short-term yields for five weeks.
Again though, this bet on rising short-term yields has yet to bear fruit, as the two-year yield drifted lower in that week to around 21 basis points.
The huge swing in favor of shorting the 10-year points and more modest short position in the two-year space suggests speculators continue to expect the yield curve to steepen.
Reference: Reuters
Thai
Eng