(Original title: Institutional investors and hedge funds diverge, suggesting the Fed’s rate hike cycle is coming to an end?)
The last time hedge funds and asset managers were so divided about the future of benchmark U.S. Treasuries was when the Federal Reserve’s monetary policy tightening cycle was about to peak in late 2018.
Zhitong Finance APP noticed that the latest data from the U.S. Commodity Futures Trading Commission (CFTC) showed that the net short position of leveraged funds in 10-year futures has increased to the highest level since 2019. However, the net long position of more optimistic institutional investors has climbed to a record level not seen since 2006.
U.S. Treasuries have rallied this year on bets that the Federal Reserve will soon end its toughest rate hike in a generation. That could push fast-money funds to short 10-year notes relative to shorter-dated debt in anticipation that the yield curve will start steepening soon.
Meanwhile, buy-and-hold investors such as asset managers are being lured by the highest interest rates on benchmark bonds in more than a decade.
“A bullish theme is developing in the interest rate market, with growing perceptions that the Fed is close to ending rate hikes,” said Andrew Ticehurst, an interest rate strategist at Nomura Securities in Sydney. As strong as it suggests.”