(Reuters) - Speculators scaled back record-high bullish positions in Eurodollar futures earlier this week due to reduced expectations of aggressive interest rate-cutting from the Federal Reserve, government data released on Friday showed.
Long positions in Eurodollar rates contracts exceeded short positions by 2.005 million contracts, down 61,871 from the previous week’s record high level, according to Commodity Futures Trading Commission data released on Friday.
This week, rates futures implied traders were positioned for two more rate decreases from the Fed this year, compared with three rate cuts a week earlier.
On Friday, Fed Chair Jerome Powell said the central bank would “act as appropriate” to keep the U.S. economy healthy, but that balanced message drew the ire of President Donald Trump who has called for rapid and steep rate cuts.
Trump also unnerved financial markets by suggesting he would respond to China’s retaliatory tariffs on U.S. goods announced earlier Friday.
Speculators tweaked their positions in Treasury futures from a week earlier.
For example, net bearish bets on U.S. 10-year Treasury note futures fell in the latest week following the prior week’s massive bond market rally fueled by recession fears.
The net amount of speculators’ short positions in 10-year T-notes exceeded long positions by 401,804 contracts on Aug. 20, according to the CFTC’s latest Commitments of Traders data
A week earlier, speculators held 414,346 net short positions in 10-year T-note futures 1CFTC11.
Last week, 10-year note yields hit a three-year low at 1.475%, while 30-year yields touched an all-time low at 1.916%.
The two-to-10-year part of the yield curve US2US10=TWEB also inverted for the first time since 2007 last week. It has inverted several times this week. This market phenomenon often precedes a U.S. recession.
Reporting by Richard Leong; Editing by Richard Chang