U.S. Treasury 5-year note futures' net shorts drop ahead of Fed meeting -CFTC

BY Reuters | ECONOMIC | 01/21/22 06:03 PM EST
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Jan 21 (Reuters) - Speculators' net bearish bets
on U.S. 5-year note futures, one part of the curve that reflects
the market's interest rate expectations, dropped to the lowest
level since September last year, Commodity Futures Trading
Commission data showed on Friday.
    Investors pared back some of their short positioning ahead
of a pivotal Federal Reserve meeting next week that is widely
expected to flag an interest rate increase in March.
    U.S. 5-year note shorts fell to 217,174 in the
week ended Jan. 18, from 299,657 contracts the previous week.
    "Total spec net positioning suggests investors are cautious
on the belly (5-year) as we head into January FOMC (Federal Open
Market Committee," said Penglu Zhao, quantitative rates
strategist at TD Securities.
    The U.S. 5-year note futures price on Friday rose,
after plunging to its lowest since January 2020 earlier this
week.
    Net shorts on U.S. 10-year note futures, meanwhile, also
declined to 271,442 contracts, the lowest since
late December, from net shorts of 349,839 the prior week.
    After dropping in price to their lowest level since July
2019, U.S. 10-year note futures rebounded on Friday,
which coincided with the slide in nominal 10-year yields. After
hitting a two-year high of 1.9% earlier this week, 10-year
yields have fallen 13 basis points.
    Meanwhile, U.S. 2-year futures' net longs fell to 38,636
contracts, the lowest since early December. U.S.
2-year notes also reflect market expectations on interest rates.
    The following is a table of the speculative positions in
Treasury futures on the Chicago Board of Trade and in Eurodollar
futures on the Chicago Mercantile Exchange in the latest week:

 U.S. 2-year T-notes (Contracts of $200,000)
        18 Jan 2022       Prior week
        week
 Long         402,602        396,495
 Short        363,966        344,678
 Net           38,636         51,817

U.S. 5-year T-notes (Contracts of $100,000)
        18 Jan 2022       Prior week
        week
 Long         352,444        314,572
 Short        569,618        614,229
 Net         -217,174       -299,657

U.S. 10-year T-notes (Contracts of $100,000)
        18 Jan 2022       Prior week
        week
 Long         461,290        413,462
 Short        732,732        757,301
 Net         -271,442       -343,839

U.S. T-bonds (Contracts of $100,000)
        18 Jan 2022       Prior week
        week
 Long         133,654        147,857
 Short        181,150        212,895
 Net          -47,496        -65,038

U.S. Ultra T-bonds (Contracts of $100,000)
        18 Jan 2022       Prior week
        week
 Long          66,240         76,368
 Short        404,590        385,899
 Net         -338,350       -309,531
 Eurodollar (Contracts of $1,000,000)
        18 Jan 2022       Prior week
        week
 Long         773,690        815,291
 Short      2,600,983      2,595,620
 Net       -1,827,293     -1,780,329
 Fed funds (Contracts of $1,000,000)
        18 Jan 2022       Prior week
        week
 Long          97,755         57,362
 Short        110,029        124,916
 Net          -12,274        -67,554

 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Chris Reese and Grant McCool)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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