According to JP Morgan Quantitative Team, investors are so negative about 10-year bonds that it may get out of hand. What is worrying most analysts at JP is that short positions on futures markets are at levels not seen before. And history shows that when the market is so big, investors see only one opportunity for profit. Also, investors seem to have forgotten everything and turned their attention to rising US inflation.
What this mean for markets?
Assuming that short investors have run out, there is hardly anyone to continue selling. But what of this? Now the high yield and low price of bonds is attractive for investors looking for a fixed return, and this will have a positive impact on the price. A higher bond price will result in the closing of already losing short positions, and this will further boost the raise. If we witness Short Squeeze, the stock market is likely to find support, while the weakness of the dollar will remain in vogue.
Source: Bloomberg Pro Terminal
Jr Trader Petar Milanov
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