Bank of America warns systematic trend followers have covered shorts in longer-dated U.S. Treasury futures as 10-year yields declined, with front-end contracts nearing buy-to-cover levels. The firm estimates CTAs face up to $86 billion of potential equity liquidations next week as the S&P 500 sits just 1.5% above key sell triggers.
Bank of America warns CTAs have rapidly reduced short positions in 10-year and long-bond futures as yields fell, with front-end contracts also nearing levels that could prompt further buy-to-cover activity.
Recent S&P 500 weakness has brought systematic funds within 1.5% of predefined sell triggers, exposing up to $86 billion of potential equity liquidations if declines persist.
Trend-following models have begun establishing short positions in gold after four weeks of losses, and may sell soybeans and aluminum, while positioning to buy the U.S. dollar against several major currencies.
Assets in leveraged and inverse ETFs linked to memory-chip stocks have swelled, with Micron-related funds holding the top spot and SanDisk ETFs rising to second, indicating rapid AUM shifts if chip prices reverse.
