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Bond bears seem overextended – Sober Look

This is a syndicated repost courtesy of Sober Look. To view original, click here. Reposted with permission.

Directional investors/traders remain heavily short or under-invested in the bond market. For example the CFTC commitment of traders shows speculative investors, particularly the smaller ones, being quite short the 10y note futures.

Source: Barchart (thousands)
“Comm” stands for “commercial” futures participants, such as dealers who use futures to hedge their positions

Institutional investors are also heavily under-invested in bonds. The so-called “real money”, such as pensions, endowments and insurance firms were overweight duration (holding higher bond positions than their targeted allocations) when yields were the lowest (back in 2012). Now with higher yields, these same investors (after being whipsawed by the market) are running duration levels that are the lowest since 2008.

Source: DB

These technical factors should provide some support to treasuries in the near term in spite of the Fed’s taper – particularly if the equity market does not perform as well as many are expecting.

Wall Street Examiner Disclosure: Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. No endorsement of such content is either expressed or implied by posting the content. All items published here are matters of information and opinion, and are neither intended as, nor should you construe it as, individual investment advice. Do your own due diligence when considering the offerings of information providers, or considering any investment.

 


Skating on Thin Ice, Keep Life Preservers Handy

We may be skating on very thin ice here, but the weight of the evidence still supports a weak bull case for the near to intermediate term. So I’m adding buy picks on the chart pick list and adjusting trailing stops to account for the risk.

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