US Rates Watch: Short and strong

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US Rates Watch: Short and strong

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US Rates Watch

Short and strong

Sliding shorter 26 July 2026

Positioning turned incrementally more bearish this week. While CTAs were already

running shorts, they added to positions in longer-dated tenors (see: Systematic Flows Rates Research

United StatesMonitor). Active benchmark funds moved from roughly neutral to underweight duration,

marking the largest duration reduction since Liberation Day. Open interest data suggest

out-of-the-money longs were cut further, leaving profitable shorts as the dominant MeghanRates StrategistSwiber, CFA

position across the curve. BofAS

meghan.swiber@bofa.com

Auction data continue to highlight a bifurcated demand backdrop, with strong domestic Eleanor Xiao

Rates Strategist

fund buying offsetting persistently weak foreign sponsorship. Meanwhile, fixed income BofAS

inflows cooled, although short-duration Treasury funds continued to attract demand as eleanor.xiao@bofa.com

investors favored attractive front-end yields amid modestly higher rate volatility. US Rates Research

BofAS

Markets are heading into the July FOMC with unusually elevated uncertainty. We remain See Team Page for List of Analysts

short 2s and favor curve flatteners. A hike would reinforce our core view of higher front-

end rates, while a dovish outcome could trigger an outsized rally given crowded shorts.

CFTC: Commodities Futures Trading

Exhibit 1: Curve-o-meter Commission

Rates to trade like positioning is roughly neutral duration with longs out of the money and modestly in a

flattener CTA: Commodity Trading Adviser

FV: Treasury 5Y contract

ITM: In the Money

MBS: Mortgage Backed Securities

OTM: Out of the Money

US: Treasury 20Y contract.

UST: Treasury Security

SF: SOFR Futures

TY: Treasury 10Y contract