(Bloomberg) — Hedge funds and other large speculators extended their net-short positions on five-year U.S. Treasury note futures to a record last week, data from the Commodity Futures Trading Commission through Oct. 17 show. They’re making the bets as speculation ramps up over who will be nominated as the next Federal Reserve chief and as odds increase that the central bank will raise interest rates again in December. The five-year note yield ended last week at 2.02 percent, the highest since March.
First, it is going to be Jerome Powell, the DC lawyer and undergraduate history major. Heaven forbid that a monetary economist like Stanford’s John Taylor would be chosen (Yellen was a labor economist). Plus, rates would likely rise under Taylor and decline under Powell.
Second, Yellen the FOMC will likely raise the target rate come December. The implied probability from Fed Funds Futures indicate a 83.6% probability of a December rate hike.
The FVZ7 Comdty US 5YR NOTE (CBT) Dec17.
Yes, we call Jerome H. Powell part of the STATIST-quo.