Leveraged net short positions in 10-year Treasury futures through hedge funds Reportedly up to the highest level since 2019, while net long positions taken by institutional investors have risen to record levels. This level of contrarian positions by these classes was last observed in late 2018, when the Federal Reserve’s rate-hiking cycle was nearing its peak. reported Bloomberg.

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Treasuries posted gains this year on expectations that the central bank is about to end its toughest rate hike cycle in a generation. As a result, fast-money funds may have been emboldened to go short on 10-year debt amid expectations that the sharply inverted yield curve will soon steepen, the report said.

Meanwhile, buy-and-hold investors and money managers alike are being lured by the highest interest payments on benchmark bonds in over a decade.

The Vanguard Extended Duration ETF it has gained over 6% since the beginning of 2023 SPDR Portfolio Long Term Treasury ETF SPTL has gained more than 4% in this period.

Andrew Tickehurstan interest rate strategist in Sydney Nomura Inc said a bullish theme had developed in rates markets, with consensus growing that the Fed is almost done with interest rate hikes. “A bullish theme has developed in interest rate markets, with a growing consensus that the Fed is almost done raising rates,” he said, according to the report.

Continue reading: US lawmakers intend to replace the fixed dollar debt ceiling with percentage of economic output