Alright, buckle up, folks. The latest CFTC data is in, and it’s painting a rather grim picture of sentiment towards US Treasuries. As of April 15th, speculators are massively increasing their bets against US debt. We’re seeing a significant surge in net short positions across the board, and this isn’t a subtle move – it’s a stampede.
Specifically, shorts on CBOT US Treasury futures jumped by a hefty 82,631 contracts, bringing the total net short to a whopping 100,785. Two-year Treasury futures saw an even more aggressive beatdown with net shorts climbing by 56,664 contracts to a staggering 1,254,773. Five-year futures are also getting the short squeeze treatment – up 40,000 contracts to 2,061,575.
Now, here’s the curious bit: while shorts are increasing on most maturities, the 10-year saw a reduction in net shorts (down 140,715 contracts to 938,755). Ultra-long bond futures also experienced a slight uptick in short positions, growing by 19,747 contracts to 220,057.
Let’s break down what this really means:
Shorting bonds is essentially betting that their prices will fall and yields will rise. It’s a play on expectations of higher interest rates or a worsening economic outlook.
This level of aggressive shorting suggests a growing conviction among speculators that the Fed isn’t going to pivot as quickly as some hope.
However, it also creates a potential for a short squeeze. If bond prices do rally – perhaps due to unexpectedly weak economic data or a more dovish Fed – these crowded shorts could be forced to cover, amplifying the price increase.
The reduction in 10-year shorts is an interesting anomaly. Possibly indicating some profit-taking, or perhaps a subtle shift in expectations specifically for that maturity.
Ultimately, this data highlights a very nervous bond market. It’s a high-stakes gamble, and someone is going to be left holding the bag. Stay vigilant, especially with yields flirting with critical levels.
