UPDATE 1-Spec net shorts in 10-yr U.S. bond futures fall after jobs data -CFTC

Fri Sep 13, 2013 4:33pm EDT

* Speculative net shorts in 5-year T-notes most since 2008

* Speculators turn net short in two-year T-note futures

Sept 13 (Reuters) - Speculators reduced net bearish bets on U.S. 10-year Treasury note futures in the latest week after a weaker-than-expected August U.S. payrolls report, according to Commodity Futures Trading Commission data released on Friday.

The Labor Department on Sept. 6 reported U.S. payrolls grew by 169,000 jobs in August, short of the 180,000 forecast by economists polled by Reuters. The downward revisions of job numbers originally reported for June and July were even more troubling to economists.

The amount of speculators' bearish, or short, positions in 10-year Treasury futures exceeded bullish, or long, positions by 85,324 contracts on Sept. 10, according to the CFTC's latest Commitments of Traders data.

A week ago, speculators held 103,094 net short positions in 10-year T-note futures.

While the latest jobs figures missed forecasts, the data did not dash expectations the Federal Reserve would pare its $85 billion monthly bond-purchase program.

The Federal Open Market Committee, the U.S. central bank's policy-setting group, will meet on Tuesday and Wednesday, with its policy decision due out at the close of the two-day meeting.

"The data is consistent with the market gradually building a short base into next week's likely FOMC tapering announcement," Gennadiy Goldberg, an interest rate strategist at TD Securities, wrote in a research note.

Treasury 10-year T-note futures on the Chicago Board of Trade for December delivery rose 5/32 in price on the day at 123-19/32, while the yield on cash 10-year Treasury notes fell 1.7 basis points to 2.888 percent.

The 10-year note yield had broken above 3 percent for the first time in 25 months before the release of the August jobs report.

Speculators turned net long in 30-year bond futures after being net short the previous two weeks. They had a net long of 17,0635 contracts on Tuesday, compared with a net short of 8,963 a week ago, according to the latest weekly CFTC Commitments of Traders figures.

While reducing their net shorts in these T-note futures, speculators turned more bearish on shorter and ultra long-dated bond contracts, the latest data suggested.

Net short ultra-long T-bond futures in the latest week grew to 7,261 contracts on Tuesday from 2,175 the prior week .

Speculative net short in five-year Treasury note futures surged to 128,756, the most since January 2008. Last week, the net short in five-year T-notes was 44,917 .

Speculators' short positions in two-year T-note futures exceeded longs by 28,673 contracts on Tuesday, compared with a net long of 6,320 last week. It was a first time in more than three months that speculators held more shorts than longs .

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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