• 651 days Will The ECB Continue To Hike Rates?
  • 651 days Forbes: Aramco Remains Largest Company In The Middle East
  • 653 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,053 days Could Crypto Overtake Traditional Investment?
  • 1,058 days Americans Still Quitting Jobs At Record Pace
  • 1,060 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,063 days Is The Dollar Too Strong?
  • 1,063 days Big Tech Disappoints Investors on Earnings Calls
  • 1,064 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,066 days China Is Quietly Trying To Distance Itself From Russia
  • 1,066 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,070 days Crypto Investors Won Big In 2021
  • 1,070 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,071 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,073 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,074 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,077 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,078 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,078 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,080 days Are NFTs About To Take Over Gaming?
  1. Home
  2. Markets
  3. Other

Treasury Bears Beware: Explosive Short-Covering Rally Coming Up

Zerohedge has an interesting post out today called Treasury Specs Are So Short, It Is Now A 4 Sigma Event. Let's take a look at his charts and a couple of mine.

According to the latest breakdown of short positions by Deutsche Bank, speculators increased their net shorts by $7.7 billion in 10Y cash equivalents to $99.4 billion, a third successive week of record low positions.


Aggregate Treasury Spec Shorts

Aggregate Treasury Spec Shorts


5-year Treasury Spec Shorts

5-year Treasury Spec Shorts


10-year Treasury Spec Shorts

10-year Treasury Spec Shorts


30-year Treasury Spec Shorts

30-year Treasury Spec Shorts


Standard Deviations Treasury Spec Shorts

Standard Deviations Treasury Spec Shorts


Eurodollars Spec Shorts

Eurodollars Spec Shorts

The above charts and comments from ZeroHedge via Deutsche Bank.


Explanations

  1. For every future short there is a future long, so the net is always zero. In this case, the commercial traders are long and the speculators are short.
  2. Eurodollars have nothing to do with euros. They are actually an interest rate play on US dollars. Short eurodollars is a bet that interest rates in US dollars will rise.


Yield Curve Monthly Chart

Yield Curve Monthly Chart
Larger Image


Yield Curve Weekly Chart

Yield Curve Weekly Chart
Larger Image


Short Covering Setup

  1. Belief in the Trump economy is extremely high.
  2. Treasury Shorts keep piling on even as yields decline.
  3. Those short from 3-4 weeks ago are already underwater.
  4. A very explosive short-covering setup is in play. All it takes is one very bad economic report and yields will plunge.

Related post: Trump Euphoria Sets In; Small Businesses Optimism Surges Most Since 1980: What's It Mean?

 

Back to homepage

Leave a comment

Leave a comment