Hedge funds turn bullish on SOFR futures

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In preparation for an anticipated end to the US Federal Reserve's programme of interest rate hikes, hedge funds are going long on short-term interest-rate futures tied to the Secured Overnight Financing Rate (SOFR), according to a report by Bloomberg.

The report cites data from the Commodity Futures Trading Commission (CFTC) as showing that funds flipped net long on SOFR futures contracts for the first time in over a month last week. 

Hedge funds added around $6.5 million per basis point to net positioning up tom16 May, according to CFTC data.

In terms of SOFR options, Bloomberg says that activity has been focused heavily on adding to positions that look to pin the Fed policy rate close to current market pricing.

Overall positioning in SOFR options meanwhile, shows hedge funds still heavily short duration, as they added to net short positions across the futures complex for a third week in a row. Hedge funds are most bearish on two-year note futures for the week, where the net short was added to by $5.8 million per basis point, according to the latest CFTC data.

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