October 19, 2018 / 8:54 PM / 7 months ago

UPDATE 1-Speculators pare U.S. 10-year T-note net shorts before Fed minutes

    * Speculators raise ultra bond net shorts to record high
    * Fund managers raise net longs in 10-year T-notes
    * Speculative net shorts in Eurodollar, fed funds increase

 (Adds details on Fed minutes, market background, other data)
    By Richard Leong
    Oct 19 (Reuters) - Speculators' net bearish bets on U.S.
10-year Treasury note futures fell a tad earlier this week
before Federal Reserve's release of minutes from its policy
meeting last month, according to Commodity Futures Trading
Commission data released on Friday.
    The Treasuries market had stabilized earlier this week from
heavy losses in the previous two weeks due to jitters about
rising inflation and a faster pace of interest rate increases
from the Federal Reserve.
    The Fed's record of its Sept. 25-26 meeting suggested a few
policymakers are open to raising short-term interest rates above
a "neutral" level as the economy has been growing faster than
their forecast.
    The latest minutes sparked a dramatic selloff in the money
markets that caused a sharp spike in key short-term rates on
Thursday. Bond yields however were buffered by safe-haven demand
from losses on Wall Street.
    The amount of speculators' bearish, or short, positions in
10-year Treasury futures exceeded bullish, or long, positions by
615,970 contracts on Oct. 16, according to the CFTC's latest
Commitments of Traders data.
    A week earlier, speculators held 622,422 net short positions
in 10-year T-note futures.
    In addition to the FOMC minutes, big swings in global equity
prices and worries about Italy's budget, Brexit negotiations and
strained relations between United States and Saudi Arabia have
stoked volatility in the bond market the latter part of this
week, analysts said.
    On Friday, benchmark 10-year Treasury yield
ended up 2 basis points at 3.196 percent, holding below the
7-1/2 year high of 3.261 percent reached last week. 
    By investor groups, asset managers increased their net longs
in 10-year T-notes to 987,547 contracts, while hedge funds
raised their net 10-year T-note shorts to 833,471 contracts.
    Bond dealers' 10-year net shorts slipped to 231,145 from
prior week's 232,818, which was the highest level since late
August, CFTC data showed.
    Among other bond contracts, speculative net shorts in ultra
bonds reached a record peak of 244,975 contracts on Tuesday.

    On the other hand, speculators pared their T-bond net shorts
to 103,937 contracts from previous week's 138,382, which was the
highest since June 2007.
    Among interest rate futures, speculators rebuilt their net
shorts in Eurodollar to 2.59 million contracts from 2.47 million
contracts which were the fewest since late December.
    They increased their net shorts in federal funds for first
time in four weeks to 30,038 contracts.
    Below is a table of the speculative positions in Treasury
futures on the Chicago Board of Trade and in Eurodollar futures
on the Chicago Mercantile Exchange in the latest week:
 U.S. 2-year T-notes (Contracts of $200,000) 
        16 Oct 2018       Prior week
 Long         516,076        486,355
 Short        775,792        729,919
 Net         -259,716       -243,564
U.S. 5-year T-notes (Contracts of $100,000) 
        16 Oct 2018       Prior week
 Long         583,109        556,118
 Short      1,402,950      1,416,058
 Net         -819,841       -859,940
U.S. 10-year T-notes (Contracts of $100,000) 
        16 Oct 2018       Prior week
 Long         555,950        544,866
 Short      1,171,920      1,167,288
 Net         -615,970       -622,422
U.S. T-bonds (Contracts of $100,000) 
        16 Oct 2018       Prior week
 Long         144,936        136,538
 Short        248,873        274,920
 Net         -103,937       -138,382
U.S. Ultra T-bonds (Contracts of $100,000) 
        16 Oct 2018       Prior week
 Long          97,082        107,208
 Short        342,057        333,363
 Net         -244,975       -226,155
 Eurodollar (Contracts of $1,000,000) 
        16 Oct 2018       Prior week
 Long         961,917      1,013,511
 Short      3,553,958      3,484,493
 Net       -2,592,041     -2,470,982
 Fed funds (Contracts of $1,000,000) 
        16 Oct 2018       Prior week
 Long         193,836        206,728
 Short        223,874        219,578
 Net          -30,038        -12,850
 (Reporting by Richard Leong in New York
Editing by Nick Zieminski and Matthew Lewis)
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