With the Federal Reserve presumably about to raise the Fed Funds Rate for the first time since 2006 this week, we thought it would be a good time to look at the latest commitment of traders report (12/11) to see how commercial (i.e. smart) and non-commercial (i.e. speculative) traders are currently positioned in the bond market.
The most extreme positioning is currently happening with the 5-year treasury bond. Commercial traders are long more futures and options contracts than at any point since August 2006. Overall, its the second largest number of long contracts going back to 1988. The long position has gotten more extreme over the past six weeks.
Commercial traders have gradually been increasing their long position in the 10-year treasury bond as well while non-commercial traders have been increasing their short position. Commercial traders and non-commercial traders have equally been on opposite sides of the 10-year treasury trade for all of 2015.
Finally, commercial traders remain very long the 30-year bond. Its interesting that commercial traders began the year very short 30-year bonds and have moved to the other extreme as 2015 progressed.