Large Asset Managers Deleverage U.S. Treasury Futures, Ultra-Long Bond Positions Shrink by ~$38 Billion in Two Weeks
nashnova research
Large asset managers slashed ultra-long Treasury futures longs by roughly $38 billion in two weeks, as the 30-year yield hit 5.68% — a 24-year high. This is not just active unwinding: a technical mechanism called "switch risk" is forcing passive selling.
Who is selling, and how much?
In the two weeks to October 6, large asset managers cut ultra-long Treasury futures longs by about $27 million per basis point in risk — equivalent to roughly $38 billion in cash bonds.
This means → this is not routine rebalancing. It is a concentrated, rapid deleveraging large enough to move long-end pricing.
Open interest in ultra-long Treasury futures — the total volume of unsettled contracts — has fallen for seven consecutive trading days, shedding another ~$20 million per basis point.
Why are they running?
Three macro pressures are hitting at once: inflation fears from a potential U.S.–Israel war against Iran, deteriorating government fiscal positions globally, and the AI boom continuing to stimulate growth.
All three point the same way: long-term rates may have further to rise — and the Fed is still trying to suppress demand, not easing yet.
The 30-year Treasury yield climbed to 5.68% over the same period, a 24-year peak, with futures prices dropping sharply. In plain terms = holders of long-duration bonds are sitting on massive paper losses, and the deeper the loss, the stronger the urge to sell.
How does "switch risk" turn active selling into a forced stampede?
The key technical mechanism is the cheapest-to-deliver bond (CTD) — when a futures contract expires, the seller can choose the cheapest bond from a deliverable basket to hand over.
When market moves cause the CTD to migrate to a longer-dated bond, portfolio duration — sensitivity to interest-rate changes — extends passively. That triggers so-called "switch risk."
In plain terms = you originally held a bet on "medium-term" rates. Then the rules shifted, and it automatically became a bet on "ultra-long-term" rates — your risk jumped, and you were forced to sell. This reflects the fact that not all of this sell-off is voluntary; part of it is compulsory.
What to watch next?
The core question is simple: can deleveraging stop on its own once yields stabilize?
If the CTD mechanism keeps migrating toward longer maturities, switch risk will keep generating fresh waves of passive selling. This means → even if macro sentiment stops deteriorating, the technical plumbing alone can keep pushing long-end Treasuries lower.
The data above comes from the CFTC's routine positioning report released Friday — the key window for tracking long-end Treasury dynamics.
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