Tags: long | Treasury | Fed | rates

Large Speculators Turn Bullish on 10-Year Notes

By    |   Tuesday, 02 Sep 2014 07:55 AM

Last week's Commitment of Traders report showed that the large speculator group is net long the 10-year Treasury Note futures for the first time in more than a year.

Granted the group's net long position is only 7,940 contracts, but it is the first time they have been net long since July 30, 2013.

What you have to remember is that a bullish position on the bonds themselves is indicative of a belief that interest rates will fall.

The shift by the large speculators seems a little odd for several reasons. First, the rate on the 10-year Treasurys has fallen from 3.0 percent at the beginning of the year to under 2.4 percent at present.

The second reason this seems like an odd time for the large speculators to shift to the bullish camp is the known intentions of the Federal Reserve to curb and eventually end the third round of quantitative easing (QE3).

QE3 has been in effect since 2012 and it allowed the Fed to purchase mortgage-backed bonds on the open market, which in effect held interest rates down.

Back in July, Fed Chairman Janet Yellen made it clear that the Fed intends to taper its bond purchases and eventually bring the buying to a complete halt.

With the Fed being incredibly accommodative for the last seven years, I don't see how you could pick now to move to a bullish stance on bonds.

I see interest rates only having one way to go and that is up. If rates are going up, that means the bonds and notes will be going down.

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Last week's Commitment of Traders report showed that the large speculator group is net long the 10-year Treasury Note futures for the first time in more than a year.
long, Treasury, Fed, rates
265
2014-55-02
Tuesday, 02 Sep 2014 07:55 AM
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