Bond Market Consensus Makes Positioning More Difficult

US Treasury net shorts haven’t been significantly reduced by the increased short-covering last month, and long positions in European and Japanese government bonds (EGB, JGB) have only gotten longer, but these crowded positions create vulnerabilities if the bond markets, which seems to be driven by global dynamics right now, become more sensitive to local pressures.

“One of the key concerns expressed by bond investors globally is the degree of consensus, and the narrowness of the breadth of those views,” writes Citi analyst Robert Crossley. “It has rightly made participants more than usually wary about positioning.”

UST 10-year short increased last month

While last month’s UST short covering was surprising after almost a year of watching the net short position develop, but the...