Hedge Funds Went Opposite Way While Treasury Selloff Deepened

They don’t think it will last.

Hedge-fund managers and other large speculators who saw the start or this week’s bond rout nevertheless moved in the opposite direction, trimming bearish bets on 10-year notes to the lowest level in 10 weeks.

Net shorts on the securities totaled 98,565 contracts as of April 28, down from 153,366 the week before, according to Commodity Futures Trading Commission data.

“These past couple of weeks have been really difficult,” said Michael Lorizio, senior trader with Manulife Asset Management in Boston.

The CFTC data was released Friday as the U.S. 10-year note was completing a weekly rout triggered by a selloff in European bonds. That diminished investor appetite for relatively higher U.S. yields and led to a monthly loss in April.

Treasury 10-year yields rose 20 basis points this week to 2.11 percent and touched 2.12 percent, the highest since March 13, based on Bloomberg Bond Trader data.

Even with the weekly jump, yields on 10-year notes remain below the 2.17 percent level where they began the year, having traded in a range of 1.64 percent to 2.26 percent.

The euro-area sell off peaked on April 29, when 55 billion euros ($62 billion) was wiped off the value of the region’s government bonds.

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