Over the past 3 months, the number of short positions on US Treasuries has grown with virtually no country going long. Australia is taking small long positions in US Treasuries.
According to Citi’s Amitabh Arora:
Flow Analysis: Over the last 3 months we have seen good appetite for European Government Bonds (EGBs), net buying of United States Treasuries (USTs), and flat demand for Japanese Government Bonds (JGBs). However, the buying of USTs hasn’t been in 10s where the main short is located. Hedge funds are accelerating their buying of EGBs (across the curve) and decreasing their selling of USTs. Real money has resumed their buying of USTs and has started to sell EGBs.
Futures Positioning in US. Since 2010, the CFTC has published a supplement to their weekly commitments of traders report specific to financial products. Asset managers are long, while dealers, hedge funds, and other buy side investors are short. Using alternative positioning indicators, we assess where we can give credence to the CFTC data, and where there is more to the picture than the CFTC data reveals.
The clearest position concentration is short USTs (Figure 1). As the grey shaded squares indicate, the short has increased materially over the last 3 months. Equally importantly, there is an absence of corresponding longs in any client group to balance these shorts. Together that points to the prospect of even lower UST yields.
With US inflation running at about 2%, the real yield on the US Treasury 10Y is about 0.33% or 33 basis points.
Fed Presidents Lockhart And Fisher were active personal asset traders in 2013. I wonder if they were big shorters?
At least Australia is showing “Lady Liberty” some affection.