Data from the Commodity Futures Trading Commission (CFTC) reveals that asset managers increased their net long exposure in select US Treasury futures contracts before the Treasury Department's unexpected move to broaden the scale of long-dated debt buybacks, while speculative traders reduced their corresponding positions.
Figures for the week ending August 18 show asset managers boosted net long positions in both 5-year and 10-year Treasury futures. The net long stance in 10-year contracts climbed by roughly 31,000 lots, while 5-year positions added about 43,000 lots. However, the shift was not uniform across all maturities, as net longs in 2-year Treasury futures fell by approximately 60,000 lots during the same period.
In contrast to the positioning of asset managers, speculative funds such as leveraged accounts further tilted their net exposure toward the short side in several longer-duration Treasury futures. Overall, ahead of the Treasury's buyback expansion, the market exhibited a clear divergence: long-term investors were adding to longs in certain long-end contracts, while speculative money leaned bearish.
The Treasury Department announced on August 19 that it would at least double the size of its liquidity support buyback operations for 10- to 30-year nominal notes, raising the per-operation cap from $2 billion to a minimum of $4 billion, with operations scheduled from September 9 through November 4. The surprise move came against a backdrop of persistently rising long-term Treasury yields.
Prior to August 19, the 30-year Treasury yield had climbed to 5.34%, marking its highest level since 2007. Following the buyback announcement, long-end yields initially pulled back noticeably but later resumed their upward trajectory, suggesting lingering doubts in the market about whether the repurchase measures can sustainably alleviate supply-demand pressures in the Treasury market.
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