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Speculators pare U.S. 10-year T-note net shorts before Fed minutes

Published 10/22/2018, 07:14 AM
Updated 10/22/2018, 07:14 AM
© Reuters.  Speculators pare U.S. 10-year T-note net shorts before Fed minutes

By Richard Leong

(Reuters) - Speculators' net bearish bets on U.S. 10-year Treasury note futures fell a tad earlier this week before Federal Reserve's release of minutes from its policy meeting last month, according to Commodity Futures Trading Commission data released on Friday.

The Treasuries market had stabilized earlier this week from heavy losses in the previous two weeks due to jitters about rising inflation and a faster pace of interest rate increases from the Federal Reserve.

The Fed's record of its Sept. 25-26 meeting suggested a few policymakers are open to raising short-term interest rates above a "neutral" level as the economy has been growing faster than their forecast.

The latest minutes sparked a dramatic selloff in the money markets that caused a sharp spike in key short-term rates on Thursday. Bond yields however were buffered by safe-haven demand from losses on Wall Street.

The amount of speculators' bearish, or short, positions in 10-year Treasury futures exceeded bullish, or long, positions by 615,970 contracts on Oct. 16, according to the CFTC's latest Commitments of Traders data.

A week earlier, speculators held 622,422 net short positions in 10-year T-note futures.

In addition to the FOMC minutes, big swings in global equity prices and worries about Italy's budget, Brexit negotiations and strained relations between United States and Saudi Arabia have stoked volatility in the bond market the latter part of this week, analysts said.

On Friday, benchmark 10-year Treasury yield ended up 2 basis points at 3.196 percent, holding below the 7-1/2 year high of 3.261 percent reached last week.

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By investor groups, asset managers increased their net longs in 10-year T-notes to 987,547 contracts, while hedge funds raised their net 10-year T-note shorts to 833,471 contracts.

Bond dealers' 10-year net shorts slipped to 231,145 from prior week's 232,818, which was the highest level since late August, CFTC data showed.

Among other bond contracts, speculative net shorts in ultra bonds reached a record peak of 244,975 contracts on Tuesday.

On the other hand, speculators pared their T-bond net shorts to 103,937 contracts from previous week's 138,382, which was the highest since June 2007.

Among interest rate futures, speculators rebuilt their net shorts in Eurodollar to 2.59 million contracts from 2.47 million contracts which were the fewest since late December.

They increased their net shorts in federal funds for first time in four weeks to 30,038 contracts.

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