Fed Can Trigger Rush to Exit on Stretched Market Positioning
- In-the-Money longs prominent as CTA’s build positions: BofA
- Hints of bullish positions liquidated in big risk event week
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With Tuesday’s inflation data in the rear-view, investor focus turns to Wednesday’s Federal Reserve policy decision which has the potential to unleash maximum pain on elevated long positions in the Treasury market. Clues are starting to emerge that liquidations are already underway, in a de-risking move during a packed week for risk events.
The potential for the Fed to signal a path of policy rate more hawkish than currently priced into the swaps market could prompt a bear flattening pain trade.