HALISTER1: Positioning Likely to Dominate H7/M7 UST Futures Roll: Nomura

Positioning Likely to Dominate H7/M7 UST Futures Roll: Nomura

(Bloomberg) -- Nomura strategists Penglu Zhao and Stanley Sun issue views on Treasury futures calendar roll.
  • Bullish TUH7/TUM7; shorts should roll early
    • Other reportable investors still the “dominant players”
    • This group’s position tends to have a stronger impact on the roll
  • Bearish FVH7/FVM7; longs should roll early
    • Asset manager positioning has been driver in recent FV roll cycles, so similar tightening pressure is expected
    • FVH7 has “meaningful size” of negative basis, which may also be bearish for the roll
  • “Mildly” bullish TYH7/TYM7; shorts should roll early
    • Non-reportable investor positioning may be “dominant driver”
    • Rise in net short positions has been “well correlated” with high open interest and lower prices since mid-2016; spread may be subject to “some widening pressure”
  • “Mildly” bullish UXYH7/UXYM7; shorts should roll early
    • Leveraged funds have largest net positions, which may make them a “larger driver of this calendar spread”
    • Rolling activities may put cheapening pressure on the roll
  • Bullish USH7/USM7; shorts should roll early
    • Net sellers may have been “more dominant drivers” of the market, may be more active in the rolling cycle and put richening pressure on the roll
  • Neutral WNH7/WNM7
    • Asset managers’ net longs highest since WN inception, now holding more than 50% of the market; should put downward pressure on the roll
    • WNH7, WNM7 CTDs have “very close maturities,” which may expose roll to “limited curve risk”
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Penglu Zhao (Nomura Holdings Inc)
Stanley Sun (Nomura Holdings Inc)

To de-activate this alert, click here

UUID: 7947283