30Y Treasury Yield Back Below 3.00% As Shorts Squeezed To Lowest Since November
10Y yields are back below 2.40% and 30Y below 3.00% as the post-rate-hike curve collapse continues, aided by the biggest short-squeeze since Brexit sending speculative Treasury shorts to their lowest since November.
The lofty fiscal expectations surrounding President Donald Trump have begun to subside.
Bond bears are having major second thoughts. As Bloomberg notes, in the aftermath of the Federal Reserve’s March policy meeting, speculators cut their short 10-year Treasury futures positions to the lowest levels — or least conviction — since November, Commodity Futures Trading Commission data show. Traders have rapidly scaled back since short positions reached record levels in February as dovish monetary policy signals continue to emerge from the Fed and confidence on the reflation trade wanes.
At the same time, Eurodollar traders added to their rate-hike bets – extending the net short to a record 3.009 million contracts… (over $3 trillion notional)
Finally, as we noited previously, another factor that bond bears need to contend with is overseas demand for Treasuries. The cost of currency-hedging for dollar assets has cheapened for Japanese investors, with the three-month basis now at the two-year average. Japanese life insurers typically buy domestic bonds in March and foreign bonds in the first half of the fiscal year that starts in April. This may help keep U.S. 10-year yields below 3 percent.
For now, real yields are back at pre-election levels…
And heading into the European close, bonds are selling off…