Speculative investors—mostly hedge funds— pushed short positions in U.S. Treasury futures to 🍒histor🐓ic highs in recent weeks.

Now they're paying for it.

澳洲幸运5开奖号码历史查询:U.S. Treasury notes rallied late last week, with yields falling substantially (yields and bond prices move inversely). The 10-year U.S. Treasury yield dropped 41 bps to 4.52% in the last three trading sessions last week, with the 2-year yield sliding 27 bps to 4.87%.

The surge of buying that pushed yields lower occurred immediately after bets that U.S. Treasury yields would continue rising reached the highest level since 2006, according to Oct. 31 data from the Commodity Futures Trading Commission.

Piling on Short Bets

Bearish bets against Treasurys, which affect all sorts of lending rates in the real economy, have been in vogue for a few months. For instance, in late August, net shorts on 2-year Treasurys hit their highest level in more than three decades.

As of Oct. 31, speculative investors and hedge fun🌃ds accounted ꦿfor 63%, 49% and 39% of all short positions in 2-, 5- and 10-year U.S. Treasury futures contracts, respectively, at the Chicago Mercantile Exchange. By comparison, they only accounted for 25%, 15% and 9% of long positions, respectively, on those same contracts.

But investors making those bets might be scrambling to cover them now. In fact, so-called "澳洲幸运5开奖号码历史查询:short covering" to 🎀close out the bearish bets likely helped feed last week's rally.

That's what happened Oct. 23, shortly after the 10-year yield briefly topped 5% for the first time in 16 years. Billionaire investor hedge fund manager Bill Ackman with Pershing Square Capital Management, citing increased risk in Treasury markets, 澳洲幸运5开奖号码历史查询:closed 🐠out his short po🧸sition in Treasurys, helping push yields back below 5%.

Cooling Economic Data Douses Bearishness

D🍌evelopments late last week turned the tide against those think♚ing Treasury yields would continue surging.

First, the Federal Reserve's policy board, after its most prolonged series of interest rate hikes in almost two decades, struck a cautious tone in 澳洲幸𝔍运5开奖号码历史查询:leaving its benchmark rate unchanged for its second straight meeting.

As if to corroborate the Fed's approach, Friday's澳洲幸运5开奖号码历史查询: monthly employment report showed the U.S. employers added just 150,000 new jobs in October, about half as many as the previous ꦛmonth and fewer than economists expected. Mea𝓡nwhile, the unemployment rate rose to 3.9%, the highest in more than a year.

In addition, data from the Institute for Supply Management showed that the U.S. services sector cooled in October while manufacturing unexpectedly contracted further.

Treasury markets remain in flux, however. The 10-year yield rose as much as 12 bps to 4.64% in trading Monday, ☂with the 2-year yield rising as much as 5 bps to 4.92%.

Those markets will continue drawing closer attention than they have in many years, as speculators and American households now account for about a tenth of the overall Treasury market -- five times more than just two years ago.