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Hedge Funds Rushed to Short Treasuries in Time for Payrolls Beat

Garfield Reynolds
·1 min read

(Bloomberg) -- Speculators timed it just about perfectly before Friday’s strong US payrolls data, adding the most to their bets against benchmark Treasuries in just over a year.

Most Read from Bloomberg

Net-short leveraged fund positions in 10-year futures climbed by almost 150,000 contracts in the week to last Tuesday, the biggest bearish shift since March 2022, according to the latest report from the Commodity Futures Trading Commission. Treasuries tumbled Friday after the March labor data boosted expectations that the Federal Reserve will hike rates by a quarter point in early May.

Fast-money funds look to be tentatively dipping their toes into bets against longer-dated bonds after getting burned in the recent banking crisis volatility when they positioned for higher yields in shorter maturities. Speculators have now largely covered their shorts on front-end bonds, according to data from Citigroup Inc.

Read More: Bond Market Is Overplaying the Risk of a Deep Recession

Traders are betting the Fed will hike again in May as the US economy is showing resilience despite the turmoil in the banking sector. The 10-year note yielded around 3.37% Monday, up from Friday’s low of 3.25%.

“Although US yields bounced following the jobs report, they remain below levels from the prior week, leaving room for more upward repricing,” Goldman Sachs Group analysts including Praveen Korapaty wrote in a note. “The mix of March data thus far should solidify the case for a hike at the upcoming May FOMC meeting.”

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