Momentum traders were, as of Thursday’s close, the most short on Treasuries since the 2013 taper tantrum episode, according to Jefferies International. Put it all together, and the coming Fed remarks loom large for all markets, not just bond traders betting on higher yields. “Fed officials could simply stick to their script and suggest that the move higher in rates occurred only for good reasons. In Treasury options, the skew of puts to calls is its most extreme since 2012, indicating traders are still positioned for higher yields — and convexity shocks remain a threat. There’s at least one other topic traders will be on alert for next week.

Source: Los Angeles Times February 27, 2021 23:37 UTC