We have seen a massive increase of net speculative shorts in the US Treasury market (white) over past weeks. It’s the highest shorts ratio in history for this market. Below the shorts positions plotted versus the US 10 year yield (orange).
Maybe there are no imminent risks for the yield to start moving but the massive shorts could prompt a squeeze if they start deciding to cover those positions.
At the same time one of Fed’s fav indicators for inflation remains muted. The 5y5y swap has been very still at these levels (white) while the yield actually has traded up to even above the 3% level. The 5y5y swap is probably anchoring the yield to trade sub the 3% level, but let’s see if those shorts gonna move this.
Source: charts by Bloomberg