10Y Treasury Shorts “Aggressively” Cut After Fed Hike, But…

Allow us to ruin the suspense. “But…” there’s still a “bigly” short.

As we noted earlier this afternoon, although specs have trimmed 10Y Treasury shorts over the last two weeks (they cut around $7.4m/DV01 in the week ended Tuesday, the second straight week of pared bearish bets), eurodollar shorts are still sitting at a record and as a percentage of open interest, the net spec short position in Treasury futs (TY eq.) is still a 3-sigma-ish event.

This is important because the latest data is current through Tuesday which means it captures the aftermath of the Fed’s “dovish” hike that sent yields plunging or, more to the point, moved markets against the (very) crowded short Treasury trade.

Here’s what we learned from the most recent CFTC data (out Friday)…

Via Deutsche Bank

Speculators decreased their net shorts in aggregate Treasury futures by 157K contracts in TY equivalents. They pared their net shorts in FV and TY by 41K and 94K contracts, respectively, for the second straight week. They also covered 5K contracts in TU and 8K contracts in US net shorts. Spec net shorts as share of open-interest reduced to -7.6% from -8.9% and at about -2.6 standard deviations away from neutral. However, specs continued to increase net shorts in Eurodollar futures, by 29K contracts this week and 329K contracts this month.

Or, visually…

Shorts

(Deutsche Bank, CFTC, +additions)

Here’s Reuters with a bit more color:

Speculators’ net bearish bets on U.S. 10-year Treasury note futures fell to their lowest since November on renewed safe-haven bids for bonds in doubts about U.S. President Donald Trump’s ability to deliver his economic agenda, according to Commodity Futures Trading Commission data released on Friday.

The amount of speculators’ bearish, or short, positions in 10-year Treasury futures exceeded bullish, or long, positions by 100,354 contracts on March 21, according to the CFTC’s latest Commitments of Traders data.

A week earlier, speculators held 194,392 net short positions in 10-year T-note futures.

Ten-year T-note futures rose to their highest in three weeks on Wednesday on concerns the struggle Trump and top Republican lawmakers encountered to pass a House bill to replace the Affordable Care Act portends similar problems to enact tax cuts, looser regulations and infrastructure spending.

On the other hand, speculators raised their net shorts in Eurodollar futures to another record high with more than three million contracts, as Federal Reserve officials reiterated their expectations for more rate increases later this year.

 

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