The Chart That Should Worry Janet Yellen The Most

Traders in the fixed income and money markets are losing their religion. Slowly but surely, beginning at the long-end, record short speculative positioning in US bonds is being unwound as traders lose faith in Janet and Donald's double-whammy. But, for now, the very shortest Eurodollar speculators remain at record shorts... if Janet fails to convince them they're still right, a lot of leverage will be unwound...

On an aggregate basis, the record short bond futures positioning is being unwound...

 

And as Bloomberg notes, time is running out for fast-money short bets on eurodollar futures, with Fed Chair Janet Yellen’s congressional testimony starting Tuesday. The latest CFTC data suggest hedge funds and other speculators have been covering short bets in five-year Treasury futures, while maintaining near-record wagers that eurodollar rates will rise.

 

Should Yellen’s remarks fail to boost the market-implied probability of a steeper rates trajectory for 2017, starting with next month’s FOMC meeting, the resilience of fast-money eurodollar shorts may waver.

Simply put, Yellen has become a victim of her own success in convincing the market everything is awesome. The ED boat is as lop-sided as it has ever been.

And given the leverage driven off the back of these speculative 'dollar' positions, Trumphoria could well be disappointed.

And from what we can see, even the ED market is losing faith in three hikes...