Systematic traders are rapidly covering bearish positions in U.S. Treasuries as falling bond yields trigger risk-management thresholds, while maintaining sizeable long equity positions despite recent stock market weakness, according to a new report from Bank of America. The bank said trend-following commodity trading advisors have accelerated short covering in longer-dated Treasury futures after yields declined further this week, with additional buying possible if prices continue rising. In equities, the S&P 500 is now only about 1.5% above key CTA sell triggers, leaving markets vulnerable to additional systematic selling if declines persist. Across global equities, Bank of America estimates systematic strategies could sell approximately $86 billion under a bearish market scenario over the next week, while buying about $13 billion if markets remain flat and roughly $1 billion if markets rise. The report also highlights shifting trends across commodities and foreign exchange, noting that gold has fallen for four consecutive weeks, eroding momentum enough for slower-moving CTAs to begin establishing short positions.
Bank of America CorpBank of America authored the report; no direct impact on its own business.
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