Thursday, May 21, 2015

Smart Money Most Committed to Falling Rates Since The Last Peak in Long Bond Yields

Commercial traders (AKA the smart money) has massively flip flopped their positioning since the end of last year with respect to the long bond. In aggregate, commercial traders have moved from a net short position (benefiting when rates rise) of about 50K derivative contracts to a net long position (benefiting when rates fall) of 22K contracts. This is a delta of about 72K contracts in about six months. Aside from the rapid change in positioning, the commercial traders net long position in derivatives is the largest since the last peak in rates at the beginning of 2014, which led to a 1.8% decline in rates over the course of a year.

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