Bank of America analysts said in a report released Monday that Commodity Trading Advisors (CTAs) suffered significant losses due to short positions in bonds and long positions in the U.S. dollar versus the Japanese yen and the crude oil.
The bank said that despite the recent decline in yields on U.S. Treasury securities, trend-following investors are still heavily positioned to short trades across U.S. Treasury futures contracts.
“These trading strategies, coupled with long positions in the U.S. dollar versus the Japanese yen and crude oil, resulted in a substantial decline (with the benchmark index’s weekly performance in the bottom 1% since 2000) for CTAs over the past week,” Bank of America said.
“Accumulated losses on short positions in U.S. Treasury bond futures may prompt investors to close these positions soon, and looking ahead to the week ahead, we anticipate the highest likelihood of repurchasing these positions short on 2-year and 5-year U.S. Treasury bond futures,” the analysts said.
However, the institution indicated that the market positions of the shares held by CTAs appear to be relatively unchanged. Outside the United States, Bank of America observes that short positions in German Bunds, British Gilts and Korean Treasuries could increase over the next week.
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