Bank of America: Treasury Positioning Still Leans Toward Higher Rates - FJElite

Positioning across rates markets remains mixed, but still biased toward higher yields. Active benchmark funds are largely running neutral duration and curve exposure, choosing instead to express risk through higher investment-grade credit exposure despite ongoing supply concerns. At the same time, CTAs remain meaningfully short at the front end and still have room to add shorts further out the curve, while futures positioning continues to point to selloff risk because of the heavy concentration in out-of-the-money longs.

Flow data tells a similarly split story. May TIC data showed strong private-sector demand, with investors stepping in at the highest yield levels in more than a year, but foreign official accounts kept selling, likely linked to FX intervention. More recent custodial data suggests that official-sector selling is still continuing. Domestic banks were also less supportive in Q2 than in Q1, likely because the flatter front-end curve and richer Treasury valuations on asset swap made the sector less attractive.