Hedge funds boost net short positions in 10-year futures to a record

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on Apr 24, 2023
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  • Their net short positions recently hit a record 1.29 million contracts.
  • What it suggests is that hedge funds are not expecting a recession.
  • Yield on long-term bond has climbed back to over 3.50% this month.

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Hedge funds are reportedly shorting the 10-year U.S. Treasury futures in a show of confidence that a recession is not very likely.

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Net shorts recently hit a high

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On Monday, data from the Commodity Futures Trading Commission revealed their net short positions to have climbed to a record 1.29 million contracts.  

The CFTC also confirmed that it was the fifth consecutive week for the net short positions to have increased. According to Damien McColough of Westpac Banking Corp:

Hedge funds may be thinking that inflation will be stickier than many in the market are expecting.

The monthly update on the Fed’s preferred inflation gauge (PCE price index) is scheduled for later this week that will offer more colour on whether or not the central bank will choose to lift rates further on May 3rd.

U.S. GDP data is coming soon

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So far, swap markets are signalling a 25-bps hike next month. A tiny probability of another hike in June remains on the table as well.

The Bureau of Economic Analysis will also report its first advance estimates for the U.S. gross domestic product (GDP) on Thursday. McColough added:

On the face of it, this big short [in 10-year Treasury futures] doesn’t reflect the view that there will be a near-term recession.

Yield on the long-term government bond has climbed back to over 3.50% this month but is still well below the high at the start of March as well as the two-year rates.

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