Speculators Bet Against The 2 Year

As we do each Monday, in last night’s Closer we discussed the most recent positioning data from the CFTC’s Commitments of Traders report. We express this data as the net percentage of open interest of futures only. In other words, positive readings indicate a net share of open interest is positioned long, while negative readings indicate that shorts are outnumbering longs.

Below is a look at speculator positioning on Treasury futures across the 2-year, 5-year, 10-year, and the long bond. Positive readings mean speculators are net bullish on the price of the bonds (expecting lower yields), while negative readings mean speculators are bearish (net short) on price (expecting higher yields). While futures traders are net short all four of the bond futures shown, they’re most bearish on the 2-year, meaning they’re positioned for higher 2-year yields (and lower prices). As shown in the top left chart, the last two weeks have seen the most extreme short positioning in the 2-year Treasury since April 1992.

From a sentiment perspective, traders appear overly confident that higher 2-year yields are on the way even though we’ve already seen the 2-year yield rise from 0.50% up to 4.45% over the last year. This seems notable from a contrarian perspective.  

(Click on image to enlarge)

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