Before the announcement of the expanded buyback of U.S. Treasuries, asset management companies increased their long positions in 5-year and 10-year futures.

According to data from the U.S. Commodity Futures Trading Commission (CFTC), asset management companies had increased their net long positions in certain U.S. Treasury futures before the U.S. Treasury unexpectedly announced an expansion of its long-term Treasury bond repurchase program, while speculators reduced their related positions. CFTC data for the week ending August 18 shows that asset management companies increased their net long positions in 5-year and 10-year Treasury futures. Specifically, net longs in 10-year Treasury futures rose by approximately 31,000 contracts, while 5-year longs increased by about 43,000 contracts. However, asset management companies reduced their net longs in 2-year Treasury futures by around 60,000 contracts, indicating that their position changes are not uniformly bullish across all maturities. In contrast to the position changes of asset management companies, speculative funds, such as levered funds, have further shifted their net positions in some long-dated Treasury futures to short. Overall, before the Treasury's announcement to expand repurchases, a divergence had already appeared in the Treasury market, with long-term funds increasing positions in certain long-end contracts while speculative funds leaned bearish. On August 19, the U.S. Treasury announced that it would at least double the scale of its liquidity support repurchase operations for nominal Treasury bonds with maturities of 10 to 30 years, raising the maximum size of each operation from $2 billion to at least $4 billion, with plans to implement this from September 9 to November 4. The backdrop to the Treasury's unexpected decision to increase repurchases is the continuous rise in long-term U.S. Treasury yields. Before August 19, the yield on the 30-year Treasury bond had risen to 5.34%, the highest level since 2007. Following the Treasury's announcement to expand repurchases, long-end yields initially fell significantly but then rose again, indicating that the market remains skeptical about whether the repurchase measures can consistently alleviate the supply-demand pressure on U.S. Treasuries. This article is adapted from Wall Street Watch, author: Yang Chen, edited by Li Cheng.