Hedge funds are taking a strongly negative view on Treasuries
This chart tracks bets by hedge funds with regards to 10-year Treasuries, as reported to the Commodity Futures Trading Commission. They have steadily built up a record net short position, even after 2022 was a historically catastrophic year for bonds and 10-year yields have stayed below last year’s peak (as the second panel shows).
As investors debate prospects for a Federal Reserve “pivot,” rate cuts and recession, some hedge funds may be staking out an unambiguous view: Treasury yields will stay high.
As Bloomberg News recently noted, the short position may be also related to so-called basis trades, when hedge funds buy cash Treasuries and short the underlying futures.