Mid-August bets against the 10-year Treasury paid off this week as the 10-year Treasury yield breezed past the 3% mark to 3.06% at Tuesday's close and near 3.08% Wednesday morning. Short positions in Treasury futures contracts hit their historical peak in August at 1.2 million contracts. While the number has receded some to 1.1 million as of the most recent Sept. 11 reading, the number should remain high if rates are expected to rise further.
Equity markets will affect both interest rates and short Treasury positions as the three have shown positive correlation in 2018. Short positions and rates both tend to increase during rising equity markets. As the S&P 500 continues to march ever higher, up 7% so far in the third quarter and 8.75% year-to-date, investor confidence in its sustainability could be gauged by continued interest in insurance against rising rates.