September 30, 2022
Funds target short end of US bond curve for softer Fed view: McGeever

ORLANDO — Hedge funds focused on the two- and five-year segments of the U.S. Treasury bond market to express their growing conviction that slowing economic growth will reduce the amount of inflation-busting policy tightening needed from the Federal Reserve.

This chimes with recent comments from some policymakers that the Fed will likely raise rates by another 50 basis points in June and July before taking stock in September to analyze the incoming data and assess how to proceed.

The latest Commodity Futures Trading Commission report on Treasuries futures positioning shows that in the week to May 24 speculators cut their net short position in two-year bonds by the most in over a year, and slashed their net short position in the five-year space by the most in over two years.

Funds’ two-year Treasuries net short position shrank by almost 100,000 contracts to 35,293, the smallest since February. It marked the biggest weekly reduction since February last year.

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