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Bailey McCann, Opalesque New York: Hedge funds are aggressively buying 30-yr T-bonds futures by ~500% to $7.2bn notional up from $1.2bn notional last week according to a new report from BofA Merrill Lynch Global Research. Funds are favoring longer duration treasuries opting to cover their shorts in 10-yrs and sell out of 2-yrs, according to Mary Ann Bartels, lead hedge fund analyst at BofA Merrill Lynch.

Long/Short hedge funds switched to growth and small cap tilt from neutral, while neutralizing quality preference. It’s the first time that Long/Short funds have favored small cap since February. They also sold NASDAQ 100 exposure to a slight net short. The investable hedge fund composite index was down 1.34% month-to-date (MTD) as of May 23, compared to down 5.65% for the S&P 500.

In terms of strategy performance, CTAs saw a slight recovery up +0.77%, CTAs are the only strategy with positive return MTD. Long/Short performed the worst, down -3.17%. Equity Long/Short bought market exposure to 35%, back to the 35-40% benchmark level, from 30% net long. Macros bought the S&P 500 and NASDAQ 100, partially covered their shorts in USD, held commodities steady, and sold the 10-year Treasuries to a net short for the first time since March.

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