BofA: Longs Prominent But Challenged

Bank of America write “while longs appear to have been the dominant trade in recent months according to our futures positioning proxy and momentum signal, many of these positions are now under pressure.”

• “Our cross-over momentum signal suggests that CTA buying has likely peaked, and US fixed income fund performance indicates that some of the short covering over Q4 may be reversing.”
• “Recent USD appreciation has supported selling from the foreign official sector while Japanese private investors showed notable buying of foreign bonds last week. Asset managers and speculative investors in USTs (excluding leveraged hedge funds) are still retaining their historic longs in futures.”
• “Our futures positioning proxy shows no clear directional bias for rates. While longs remain the more prominent position, a larger portion is out of the money vs shorts, which are less popular but largely in the money. Through Thursday, there were more shorts vs longs created on the curve particularly at the front-end. The largest change in futures positions were longs destroyed, to the greatest extent in TY.”