Tags: rick | pendergraft | Large | Speculators | Treasury | Bubble

Large Speculators Aren’t Inflating a Treasury Bubble

By    |   Tuesday, 31 Aug 2010 10:46 AM

Everywhere you turn these days, you can find reports about Treasuries being the next bubble that is going to burst. 

I have had friends contact me, asking for my thoughts or how to take advantage of the bubble. While I agree to some degree that bonds appear to be heading for a correction, timing such a correction is difficult.

One of the things I like to look at to determine when a correction is set to occur is the sentiment toward that investment vehicle. 

The best sentiment indicator for Treasuries is the Commitment of Traders report for the 10-year notes and the 30-year bonds.  Personally, I like to look at the large speculators and how bullish they are towards these two. 

Looking at the 30-year bond, the large speculators are net short approximately 20,000 contracts. While this is the most bullish the large speculators have been in the last two years, they are still net short. This falls far short of the five-year high of a net long position of 60,000 contracts reached in December 2007.

On the 10-year notes, large speculators are net long almost 100,000 contracts.  Once again, this is the most bullish they have been in the last two years, but it falls far short of the five-year high of 600,000 contracts reached in the spring of 2007.

The point I am trying to make is that I don’t see a massive correction in Treasuries occurring when the investment crowd is so far from reaching an extreme level of bullishness. 

When large speculators are still net short on the 30-year bond and 500,000 contracts shy of the high on the 10-year note, it looks like the bond bears will have to wait for the bond bubble to burst.

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Pendergraft
Everywhere you turn these days, you can find reports about Treasuries being the next bubble that is going to burst. I have had friends contact me, asking for my thoughts or how to take advantage of the bubble. While I agree to some degree that bonds appear to be heading...
rick,pendergraft,Large,Speculators,Treasury,Bubble
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2010-46-31
Tuesday, 31 Aug 2010 10:46 AM
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