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Hedge funds short on US rates
13 June 2014
Net short positioning on US rates cut -27%
Hedge funds have increased their short bets on US rates as
the flow of economic data improves and inflation figures edge
higher, according to a report by Lyxor.
Moderate price pressures materialised recently
with personal consumption expenditure (PCE) falling 1.6%
year on year in April, even though the inflation rate
remained below the US Federal Reserve's 2% target. This
triggered a rise in ten-year treasury bond yields last week,
which caused some losses for commodity trading advisors
In this environment, global macro funds have aggressively
cut their net short positioning on US rates and credit, from
-9% of net assets at the end of April to -36% on June 10.
With regards to recent performance, equity-oriented
strategies including those driven by events, continue to
rebound while long-short credit and fixed-income arbitrage
strategies remain resilient in spite of higher-bond
The strongest performance was registered by
merger-arbitrage funds. The pipeline of corporate events,
including mergers and acquisitions, continued to increase
with high volumes of transactions announced recently.
Positioning on commodities has evolved. Some global macro
and CTAs increased their long positioning on energy, likely
associated with the mini-stimulus package announced by
the Chinese authorities.
The overall positioning of global-macro funds on energy is
moderate, but increasing from 1.8% of net assets in early May
to 3.5% on June 10.
Meanwhile, CTAs have considerably sizeable positions that
increased from 20% of NAV to 25% during the same