Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Column: Funds lose nerve on higher U.S. yields bet ahead of Fed

ForexSep 20, 2021 09:00AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. The Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 27, 2019. REUTERS/Brendan McDermid/File Photo

By Jamie McGeever

ORLANDO, Fla. (Reuters) - Funds are loading back up on U.S. Treasuries ahead of the Fed's Sept. 22 policy decision, suggesting they are not as confident as they were a few weeks ago that yields are headed higher.

Positioning data from the Commodity Futures Trading Commission show hedge funds and speculators in the week to Sept. 14 bought the most 10-year Treasuries futures since April.

They added 128,643 contracts to their net long position, reversing the historic shift in the opposite direction only two weeks earlier. In more than three decades of weekly CFTC data, funds have hoovered up as many contracts as that only 10 other times.

This comes ahead of the Fed's meeting on Wednesday where it is expected to open the door to reducing its monthly bond purchases, but push back announcing the actual details until November or possibly December.

That's because recent economic data has been soft, most notably the August employment report which showed a huge miss on net new jobs relative to consensus forecasts.

Other indicators have undershot forecasts, the U.S. economic surprises index slumped to the lowest since June last year, growth forecasts have been ratcheted down, and Wall Street has wobbled. Against that backdrop, it may be little coincidence that funds have piled back into 10-year Treasuries.

The demand for longer-dated bonds has not been mirrored at the shorter end, according to CFTC positioning data, indicating a "bull flattening" of the 2s/10s yield curve.

Funds reduced their net short position in 2-year Treasury futures in the week to Sept. 14 to 24,633 contracts from 65,257 contracts the week before.

The curve did indeed flatten to 106 basis points, the flattest in three weeks. But it has since widened back out, thanks to the 10-year yield spiking to 1.38% on Friday, the highest in two months.

Could funds find themselves flat-footed? As Steve Major at HSBC points out, the 10-year yield just above 1.30% is broadly in the middle of its 0.91%-1.74% range this year. So the market is delicately poised.

Much will depend on the Fed on Wednesday and the strength, or otherwise, of incoming economic data, particularly the September jobs report. Major is sticking with his 1.0% year-end forecast for the 10-year yield, much lower than most others.

Macro funds appear to share his skepticism, however, that yields will go much higher. For the most part, they have been long of Treasuries for the past year or more.

But they will be hoping for some kind of fireworks from the Fed on Wednesday. They had a good second quarter, but are banking on a pickup in volatility to maintain that performance into year-end.

(By Jamie McGeever; Editing by Lisa Shumaker)

Column: Funds lose nerve on higher U.S. yields bet ahead of Fed
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email