Risk/Reward in the 2-year Treasury note is positive

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  • Post category:Bonds / Public

Commitments of Traders (CoT) in the 2-year Treasury note flashes contrary bullish

Interesting positioning data on the 2-year Treasury note. As per our favorable view of bonds for a 2023 deflationary uproar that catches inflation obsessed herds off sides, Commercial traders are heavily long the 2-year note while large Specs are heavily short. That is a completely bullish alignment on a contrarian basis as Commercials will tend to be right at turning points while large Specs will be right over the course of a trend. *

But the little guy, while not long Treasury notes, has covered his shorts to a large degree, which is not a bullish sign (but perhaps a sign that he’s favoring short-term cash equivalents as he flees the stock market).

Anyway, it’s an overall bullish CoT situation from a sentiment/positioning perspective.

2 year us treasury note commitments of traders

2 year treasury note commitments of traders

* Don’t listen to those who speak of Commercials as the “smart money” and Specs as the “dumb money”. They are either trying to instigate a story for readers to obsess upon or speaking out of ignorance. Specs appear smart all along the trend and then eventually get very wrong at the turn. Meanwhile, Commercials appear wrong all along the trend until they get right at the turn. What’s actually happening is that the two groups are like a Yin and Yang to each other. It’s the process of the market. 

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