Notable Short Cover Seen Across Most Of Curve On Friday

Friday’s rally in Tsy futures and preliminary OI data point to aggressive net short cover across most of the curve, with the only exception coming via apparent modest net long setting in UXY futures.

• The apparent short cover in TY futures provided the most notable positioning swing.
• A reminder that we wrote the following during the rally “a quick reflection covering recent positioning when it comes to the post-Friday data rally in Tsys. More than $15mn DV01 equivalent of fresh net shorts was set across the Tsy futures curve over Wednesday and Thursday (as flagged in our daily OI updates). While some of that can likely be explained away by basis trade activity, today’s move may partly reflect a squeeze of some of the weaker short positions.”
• This looks to have played out, with over $11.5mn of net DV01 equivalent short covering seen.
• The move came as markets reacted to March’s PCE data, with revisions to the data set pointing to January as the key driver for the upward surprise in the core Q1 PCE reading the day prior, presenting a less hawkish outcome for markets.