Expectation of Sell-Off and Increase in Short Positions in US Treasuries
Investors in US Treasuries, which have pushed yields to two-decade highs, are rapidly increasing their short positions in anticipation that the sell-off wave will continue.
Investors in the US Treasury market continue to position themselves for a continuation of the sell-off wave that has driven yields to their highest levels in nearly two decades.
Years-High in Bond Yields
The benchmark US 10-year Treasury yield climbed to its highest level since 2007 on Tuesday as investors prepared for the Federal Reserve to raise interest rates against inflation concerns.
Additionally, the two-year Treasury yield reached its highest level since 2024, supporting the overall trend of weakness in the market.
Investors' Expectation of Decline
Market positioning clearly shows that investors expect further weakness in bonds and are not eager to treat the declines as buying opportunities.
Rapid Increase in Short Positions
According to JPMorgan’s Treasury client survey, cash market investors increased their short positions last week at the fastest pace seen since early 2025.
Futures and Swap Market Data
According to CME Group data, investors increased their short positions in futures both before and after the higher-than-expected inflation data. Meanwhile, the swap market is pricing in about 50 basis points of tightening from the Fed for the rest of the year.