Extreme Treasury Positioning Shows Short Squeeze Has Room to Run
- Hedge funds recently extended duration net short in futures
- Options data suggest increased demand to cover short positions
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Hedge funds increased already elevated net short positions on US Treasuries last week, fueling a rout that sent 10-year yields to 4% for the first time in more than a decade.
The shift fueled short squeeze price action, with Treasuries already under pressure amid thinning liquidity and fears of more aggressive Federal Reserve rate increases. The 10-year yield surged to the highest since 2008 last week, before tumbling back after the Bank of England resumed buying long-dated bonds.