Bullish Bets on U.S. Treasuries Take a Heavy Hit; Traders Turning to Treasuries as a Safe Haven Caught Off Guard

Title context: Text: The bulls that recently flooded into the US Treasury market have just been dealt a heavy blow, as comments from two Federal Reserve officials and the latest signs of stubborn inflation raised the likelihood of an interest rate hike, causing US Treasuries to plunge. Tuesday's selloff spread across all maturities of US Treasuries. Fed Governor Christopher Waller expressed support for a rate hike and said he would favor a 50-basis-point increase if inflation continues to accelerate, prompting traders to price in a more aggressive Fed tightening path. Consumer price data came in above expectations, adding further fuel, and hawkish remarks later from Dallas Fed President Lorie Logan intensified the shift. The selloff pushed the yield on 2-year US Treasuries to its largest increase in 19 months, while the 10-year yield briefly returned above 5%, catching off guard investors who had recently poured into Treasuries or reduced their bearish positions amid market unease over AI-themed trading. Bank of America strategists wrote in a November 8 report that over the past week, asset managers continued to build long positions in futures across the yield curve while covering short bets at the long end.