By Davide Barbuscia and Carolina Mandl NEW YORK (Reuters) - Recent shifts in the U.S. Treasury yield curve may indicate that market optimism around ...
STORY CONTINUES BELOW THESE SALTWIRE VIDEOSNEW YORK - Recent shifts in the U.S. Treasury yield curve may indicate that market optimism around the economy could wane, with some investors looking at Federal Reserve Chair Jerome Powell's speech at an economic symposium on Friday as a potential trigger for a correction or rapid unwind in positions.
In line with that trend, hedge funds' bearish bets on long-term U.S. Treasuries have built up over several weeks, with net short positions in 10-year U.S. Treasuries futures at their highest levels since the beginning of July, according to Commodity Futures Trading Commission data from last week. That has led to the risk of an unwind, some market participants say.
The key question is how much further bear steepening the market needs to see for"investors to become nervous," he added. Investors tend to become frustrated when largely anticipated recessions fail to materialize as the Fed approaches the end of its hiking campaigns,"so bond markets push the tightening aggressively down the curve right when the economy is slowing - a dangerous cocktail," Peccatiello said.
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