Hedge funds bet amid 2-month rally

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NEW YORK / Bloomberg

Hedge funds are the most bullish on Treasury benchmark 10-year notes in two years, as U.S. government securities head for a second straight monthly gain.
Large speculators including hedge funds boosted their positions in Treasury 10-year futures to a net 84,659 contracts as of Feb. 23, according to the latest data from the Commodity Futures Trading Commission. It’s the highest level since April 2013.
Treasuries have returned 2.9 percent this year, based on the Bloomberg World Bond Indexes, as tumbling stock and oil prices drove demand for the safest assets. The rally in January and February is the first two-month advance in a year.
Chinese stocks approached the lowest level in 15 months on Monday. Traders see about a 50 percent chance the Federal Reserve will raise interest rates in 2016.
“The global economic situation is not supportive for the Fed to continue to raise the rate,” said Park Sungjin, the head of principal investment in Seoul at Mirae Asset Securities Co., which oversees $6.44 billion.
“That makes the Treasury market bullish.” Park said he’s investing in U.S. money-market securities and real estate.
Fed Outlook
The benchmark Treasury 10-year note yield fell three basis points to 1.74 percent as of 7:15 a.m. in London, according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in February 2026 rose 7/32, or $2.19 per $1,000 face amount, to 98 31/32.
The Shanghai Composite Index tumbledas much as 4.6 percent, bringing it within 0.1 percent of the lowest level since November 2014. The odds the Fed will follow its December rate increase with another in 2016 are about 53 percent, futures prices compiled by Bloomberg indicate. The figure had dropped from 93 percent at the start of the year.
Economic data this week will show U.S. manufacturing is shrinking though the economy is adding jobs, according to Bloomberg surveys of economists
Factory activity contracted for a fifth month in February, based on the responses before the Institute for Supply Management reports the figure on Tuesday.

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