Record 5 Year Treasury Shorts Crucified

US Treasury yields are collapsing across the entire curve, down  9-10bps from their pre-opening highs this morning. While 10Y pushed belwo 1.80% (to one-year lows), it is 5Y yields that have traders the most anxious as they look to break out below three-year channel lows...

The entire curve is in freefall..

 

Slamming 5Y below its three-year channel lows..

 

What happens next? We suspect more of the same as Net Shorts in the entire Treasury complex remain near record highs...

 

And 5Y Speculative positioning is actually at a record short...

As SMRA details,

The latest Commitments of Traders report released by the CFTC this past Friday (consisting of data through 02/02/16) revealed that, prior to last week's bull flattening finish, traders (larger speculators) increased net-long bets in 30-Yr futures, decreased net-long positions in 10-Yr futures, decreased net-short positions in 2-Yr futures, and increased net-short posturing in both 5-Yr and 3-month eurodollar futures.

 

In the 5-Yr part of the curve, since large speculators are typically trend followers and commercial hedgers typically build positions against the trend, it is incredibly odd to see large speculators now holding their shortest position ever, while commercial hedger net-long positions are sitting just shy of historic levels (99.6 %ile).

Thank you Janet for the "no brainer."