Jeffrey Gundlach left the mostly unchanged U.S. Treasury market with a warning heading into this past weekend: Everything could change soon.
In a tweet, DoubleLine Capital’s chief investment officer pointed to the latest data from the Commodity Futures Trading Commission. It showed hedge funds and other large speculators added to bets against 10-year Treasury futures, bringing their net short position to a record of 698,194 contracts. The group has also built an unprecedented short in ultra-long bond futures.
To Gundlach, this one-sided wager from speculators “could cause quite a squeeze.” That proclamation caused a stir, judging by the feedback on Twitter and the amount of Bloomberg readership. Bond bulls have to be feeling as if they have the wind at their backs. Also last week, another prominent West Coast chief investment officer, Scott Minerd of Guggenheim Partners, tweeted that investors would be wise to reduce risk ahead of impending instability.
Before loading up on Treasuries, however, I’d advise looking at what Gundlach had to say about futures positioning just three months ago.
“This is kind of mind-blowing that we can’t get a rally off of this type of speculative short in the Treasury bond market,” Gundlach, DoubleLine’s chief investment officer, said in a webcast. “You almost always get a rally,” he said, “but now we’re just going sideways. So for the bulls of the world, this is not really all that corroborative.”