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A Commitment of Traders (COT) report shows traders piled into treasury shorts in record numbers in recent weeks.

10-Year Treasury Note Futures Positioning

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The blue line is large speculators (think hedge funds). The red line represents small speculators and the black line represent commercial traders who take the other side of bets.

The commercial traders are hedged. The other traders may or may not be.

30-Year Bond Yield​

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Some people think the 30-year bond has already broken out. They need a fatter crayon.

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Crowded Bet Pays Off

Bloomberg reports The Crowded Treasuries Trade Is Paying Off.

One of the most crowded trades in financial markets is paying off.

Investors piled into short positions in U.S. Treasuries this month, making them the second most popular bet in financial markets, according to fund managers surveyed by Bank of America Merrill Lynch Global Research May 4-10. Those wagers paid off Tuesday, after the 10-year yield rose to its highest level since 2011, extending a selloff in the world’s biggest bond market.

“The short Treasury trade has become more extreme,” said Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, in an interview. “As Treasury yields finally slice through 3 percent, more likely people will add to that than reduce it.”


The survey, which collected responses from 178 investors with combined assets of $525 billion, found that the most popular bet across markets for a fourth-straight month was a bullish stance on FAANG-BAT stocks, a group that includes U.S. tech giants Facebook, Amazon, Apple, Netflix, and Google parent Alphabet, as well as China’s Baidu, Alibaba and Tencent. Bearish bets on the U.S. dollar were the third most crowded trade.

The Bearish bets on the dollar, the third most crowded trade have been wrong since mid-April.

The next set of COT reports will be interesting. The reports come out on Friday but are as-of Tuesday.

Mike "Mish" Shedlock