Did you think the massive short in US Treasurys had been materially trimmed?
Did you care?
I’d wager the answers there are, in order, “I hadn’t thought about it” and “no.” But as it turns out there are a whole lot of things you should be thinking about as someone who’s presumably active in the market that you likely relegate to the mental backburner on a daily basis.
Treasury positioning is one of those things. See the only reason your stocks are higher is because the market is still buying the reflation narrative. And one expression of the faith in that narrative is positioning in USTs. That’s why everyone freaked the f*ck out a couple of Fridays ago with 10Y yields hit YTD lows.
Well, for those interested, have a look at the following chart from SocGen which shows that bearish bets on 5s and 10s are (still) a three-sigma event.
(SocGen)
Amusingly, those same hedge funds are still long stocks and short vol…
(SocGen)
…which means that if the highly anticipated repricing of yields higher turns out to be …err… higher-er–er than expected, the long equities side of this bet is probably going to be offsides as a dreaded “tantrum” event transpires.
