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Minyan Mailbag: 10-year Short Bets


Comfortable yet?


Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next article with that very intent.

"Chicago short interest on 10 year note has spiked over last 60 days....i mean huge parabola...especially when viewed on a five year or longer chart....any professor knows "what's up with that"?" Minyan David


The chart below shows the net position (long minus short) for both large and small speculators in the 10-year T-Note. We can see that over the past few weeks, the net short positions have exploded, to the point that they are by far the largest in history.

While the data isn't particularly consistent for the 10-year, typically the interpretation of such an extreme would be contrary, meaning we would expect the notes to rise in price and decline in yield.

One possible alternative explanation is that the CFTC changed reporting limits for many of their contracts in January, so I'm not quite sure if we're dealing with the same population of traders now that we were before.

As far as "why" we're seeing such huge short bets, I have ideas but they would only be educated guesses...I would defer to a bond guru such as Brian Reynolds for a more coherent read.


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