Funds pause record selling of 10-year Treasuries

Hedge funds paused their relentless selling of 10-year Treasuries futures ahead of last week’s U.S. consumer price data, but the spike in annual inflation to its highest in more than three decades suggests the hiatus could be a short one.

The October inflation report released on Nov. 10 was always going to be a biggie, potentially pivotal for the Fed in respect of when it starts raising interest rates and by how much over the coming years.

It didn’t disappoint. The headline rate of annual inflation jumped to 6.2%, the highest since 1990, and poured fuel on the already raging debate over whether the Fed is behind the curve.

Commodity Futures Trading Commission data for the week to Nov. 9 shows that funds trimmed their net short position in 10-year Treasuries futures by 1,337 contracts to 267,332 contracts ahead of the release.

This halted the huge build up of positions betting on a higher 10-year yield. October’s unwind of 296,052 contracts was the biggest monthly swing to short positions since 2005, and the second-largest since the contract’s launch in the mid-1980s.

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