A Bank of America CTA report indicates that trend funds began adjusting their large-scale short positions across the entire US Treasury yield curve last week, but the changes primarily occurred at the short end first. As the yield curve steepened again, with the 2-year yield declining and long-term yields rising,
2-year Treasury futures have triggered the first batch of CTA buy-back conditions, indicating that some more risk-sensitive systemic funds have begun closing their positions.
However, the long end has not shifted in tandem. The report explicitly states that the back-end short positions remain largely intact and are near their highest level since May 2021. Model signals show that the short, medium, and long-term trend strengths for 10-year US Treasury CTAs are approximately -75%, -100%, and -100%, respectively, while for 30-year they are approximately -93%, -100%, and -92%, indicating that systemic funds still view the long end as a clear bearish trend.
This means that the current bond market is not a full-blown bull market, but rather exhibiting a clearer maturity divergence: the short end is trading on a "decreasing risk of further tightening by the Fed," while the long end is still trading on fiscal financing pressures, increased supply, and rising term premiums. If short-term yields continue to decline, CTAs may accelerate their replenishment; however, if long-term yields remain high or even continue to rise, a steeper yield curve may still be the core characteristic of the market in the next stage.
