A wave of quant investors seems to be fueling Treasury gains this week, with Citigroup Inc. strategists saying that the short-term buying strategy is likely not over yet.
(Bloomberg) — A wave of quant investors seems to be fueling Treasury gains this week, with Citigroup Inc. strategists saying that the short-term buying strategy is likely not over yet.
Those traders would still need to buy an additional $35 billion in US government debt “on follow-through this week,” Ed Acton and Bill O’Donnell note in a note late Tuesday. That’s after a two-day US bond rally that sent yields on five-year notes down the most in a month on Tuesday.
The action indeed appears to be focused around the belly of the Treasury curve.
Open-interest data showed an increase of approximately 92,000 in five-year note contracts during Monday and Tuesday’s rally, according to data compiled by the CME Group. That’s consistent with fresh long positioning. Open interest now sits at the most since March 2020 on an aggregate basis.
Treasuries rallied earlier this week, with traders piling into the safer corners of the market amid lingering concerns about the health of US regional banks. After a breather on Wednesday, yields on five-year notes edged lower again in Asia trading Thursday to around 3.48%.
(Updates 5-year bond trading in last paragraph.)
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