Interesting note from Nomura’s George Goncalves this morning, who notes a bear “pile-on” in the US Treasury market. Current market positioning for bonds has turned to an overall bearish bias as four out of the six key investor types we track had bearish flows in their latest updates. Specifically, both primary dealers and foreign central banks reduced UST positions on the week, while Japanese investors were net sellers of foreign bonds (after being buyers the prior week). In addition, both domestic and foreign commercial banks reduced their Treasury/Agency holdings. There was, however, some buying from specs earlier last week and bond mutual funds saw the largest net inflow since April. Net, selling pressures have turned decided negative for USTs.
This is something that’s going to be closely watched.
There’s a lot of talk about a “Great Rotation” out of bonds and into stocks.
But so far there hasn’t been that much selling in bonds. Watch this space.