CFTC Data Signals Bond Bearish Shift: What It Means for Fixed Income Markets

The Commodity Futures Trading Commission's (CFTC) Commitments of Traders (COT) reports have long served as a barometer for speculative sentiment in futures markets. Recent data from these reports reveals a striking shift in positioning among non-commercial traders—primarily hedge funds and institutional speculators—in Treasury futures, signaling a growing bearish bias. This development carries significant implications for Treasury yields and the broader fixed income market, as speculative behavior often amplifies or moderates macroeconomic trends.

A Bearish Reversal in Treasury Futures

According to the latest COT report for the week ending September 9, 2025, non-commercial traders have extended their net short positions in key Treasury futures contracts. The 5-Year Treasury Note and Ultra 10-Year Treasury Note saw speculative short positions increase by 127,224 and 59,952 contracts, respectivelyCOT Bonds Charts: Speculator Bets led by 5-Year & Ultra 10-Year Bonds^[6]. This contrasts sharply with earlier in the year, when bearish positioning had temporarily receded. For instance, in January 2025, non-commercial traders reduced their net shorts on 10-Year Treasury futures to 567,935 contracts, a marked pullback from the all-time highs recorded in October 2024Hedge funds, non-commercials less bearish on 10-year Treasury …^[3]. However, by August and September 2025, hedge funds and asset managers had once again ramped up bearish bets, particularly in the front-end and belly of the Treasury futures curveBearish Treasuries Bets Grow as Traders Brace for Jobs Data^[4].

The COT data also highlights divergent positioning across the yield curve. While the Ultra 10-Year Treasury Note is now characterized by a strength score of 72 percent—a measure of extreme bullish positioning over a three-year horizon—the 5-Year, 2-Year, and 1-Month SOFR contracts are categorized as "extreme bearish," with strength scores below 20 percentCOT Bonds Charts: Speculator Bets led by 5-Year & Ultra 10-Year Bonds^[6]. This suggests a pronounced flattening of the yield curve, driven by speculative activity, which could exacerbate existing macroeconomic pressures.

Implications for Treasury Yields

The resurgence of bearish speculative positioning in Treasury futures is a critical signal for yield trajectories. Short positions in Treasury futures imply that speculators anticipate rising yields, as selling futures locks in profits if prices fall (and yields rise). The CFTC's Traders in Financial Futures (TFF) report further underscores this trend, noting that Leveraged Funds—often synonymous with hedge funds—have increasingly positioned themselves as net sellers in the Treasury marketCFTC Commitments of Traders | Office of Financial Research^[5].

Historically, such shifts have preceded periods of heightened volatility. For example, the bearish bets in August-September 2025 coincided with traders bracing for strong jobs data, which would typically push yields higher by reducing expectations of monetary easingBearish Treasuries Bets Grow as Traders Brace for Jobs Data^[4]. If these speculative positions are reinforced by actual macroeconomic data—such as stronger-than-expected employment figures or inflation readings—Treasury yields could face upward pressure, potentially accelerating the unwinding of long-held bullish positions in the Ultra 10-Year segment.

Broader Market Implications

The bearish shift in Treasury futures also reflects broader uncertainties in fixed income markets. Asset managers, who have maintained a long bias in Treasuries to meet portfolio benchmarksHedge funds, non-commercials less bearish on 10-year Treasury …^[3], may face mounting pressure to rebalance as yields rise. This could create a self-reinforcing cycle: rising yields force asset managers to sell longer-duration bonds, further pushing yields higher.

Moreover, the divergence between speculative positioning in different parts of the yield curve—extreme bullishness in the Ultra 10-Year and extreme bearishness in the 2-Year—signals a fragmented market outlook. Such fragmentation often precedes policy-driven volatility, as investors struggle to reconcile short-term macroeconomic data with long-term structural trends. For instance, the Federal Reserve's stance on inflation and rate normalization will play a pivotal role in determining whether speculative bearishness translates into sustained yield increases.

Conclusion

The CFTC's COT reports provide a window into the psyche of speculative investors, and the latest data paints a clear picture: non-commercial traders are increasingly bearish on Treasury futures, particularly in the front-end of the curve. While this positioning may reflect anticipation of stronger economic data and tighter monetary policy, it also introduces risks of self-fulfilling dynamics that could amplify yield volatility. For fixed income investors, the lesson is clear: the bond market is no longer a safe haven. As speculative positioning continues to evolve, vigilance and agility will be essential in navigating the shifting landscape of Treasury yields.