However! Having said all this, I do worry about the positioning in the futures market.
It seems I’m not the only person keeping an eye on economic data, and the “speculators” in the futures market have very large net long positions in the 10-year Treasury note, according to Commitment of Traders data. This tells me that we could see more downside movement in long-term rates over the very near term, but after that, we could soon see a “tradable,” multiweek bounce in interest rates.
Going forward, we’ll be watching the sentiment numbers. The daily sentiment index is showing that bullishness in Treasury bonds (bullishness on the price, not the yield) has reached 78 percent. That’s not at the extreme levels that would signal we are getting ripe for an immediate reversal, but it is getting pretty high.
If and when that number rises into the 90s, we’d begin to look for a reversal – in this case, a bounce in rates and a decline in bond prices.