Frank Flett, head of macro strategy at Citadel Securities, says the risk-reward has shifted toward a rally in long-dated U.S. Treasuries, citing crowded short positions and improving inflation prints. He had warned last month that investors were underestimating the risk of a Fed July rate hike. Citadel’s simulations of CTAs and trend-followers show short positions are “substantially excessive” versus recent history, suggesting further declines would likely produce limited selling while sustained

Frank Flett, head of macro strategy at Citadel Securities, says the risk-reward has shifted toward a rally in long-dated U.S. Treasuries, citing crowded short positions and improving inflation prints. He had warned last month that investors were underestimating the risk of a Fed July rate hike. Citadel’s simulations of CTAs and trend-followers show short positions are “substantially excessive” versus recent history, suggesting further declines would likely produce limited selling while sustained gains could force short covering. Flett says concerns about Fed credibility are overstated because recent soft jobs and inflation reports “appear to justify a more dovish policy response.”