BofA Positioning Overview

Bank of America suggest that “longs are more prominent in new positions created in recent weeks while remaining shorts are out of the money and vulnerable to covering. CTAs continue to reduce underweights, particularly at longer tenors, and are moving towards a more neutral curve stance.”

• “UST fund inflows are moderating, as they do historically when rates peak. We believe this is also supporting a retreat in asset manager futures positioning. Should rates continue to trend lower, reduced asset manager demand may serve to reduce the size of the basis trade. We see preliminary signs this is happening in recent data.”
• “On the week through Thursday, open interest further out the curve increased materially with new longs created. At the front end, open interest declined with more shorts destroyed vs longs created. Our futures positioning proxy points to a bias for rates to continue rallying. Longs outstanding are more prominent and ITM, while the few shorts outstanding remain OTM.”