Friday, December 9, 2016

Treasuries Surprisingly Unmoved




Record net short Treasury positions held by CFTC ‘non-commercial’ accounts were the result of the strongest monthly Treasury price decline since 2009.  With the FOMC meeting scheduled for next week, we expected some squaring up of this outstanding position.  Instead, only slight changes in open interest indicate that any position adjustment has been more modest than anticipated. 

Price action too has been muted with many contracts across the curve relatively unchanged since the first trading session of this month.  Of course there is room still for hedge funds to curtail their net short positions before the FOMC meeting results are released on Wednesday, but given the disinterest in doing so over the last week, we might imagine no rush to adjust positions now. 

All this points further to the implications made some weeks ago in ‘Record Jump in Volume and Open Interest Point to Strong Trend in Rates Market’, that this bearish trend in Treasuries is more lasting than any seen in quite some time.  Below is a table of selected Eurodollar and Treasury contracts along with their price and open interest change since the beginning of this month. 

 

Contract
Current Px
Price Chg from Dec 1
Open Interest Chg from Dec 1
EDZ7
98.585
0.01
+1K
TUH7
108-12.75
+0-2.75
-14K
FVH7
117-26
-6.5
-4K
TYH7
124-07
+0-08
-3K
USH7
149-00
-0-16
-10K
WNH7
158-05
-1-00
-11K

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