CTAs' Positioning and Flows - Biweekly Update

The USD long is back, while momentum cools in equities and credit. Equities: CTAs have reduced exposure, particularly in Europe and EM, while US and Asian tech-heavy markets have proved more resilient. Further liquidation is expected in parts of Europe, notably France, while simulations show limited upside buying but potentially substantial liquidation if equities fall persistently. Bonds: CTAs remain heavily short duration, with momentum signals near extreme bearish levels. Some buying is expected, particularly in Korea, Canada and the EU long end, but meaningful short covering likely requires UST 10y yields to fall into the 4.85-4.95% range (~30-40bp from current levels); a move towards 4.65% could trigger a much larger unwind, with CTAs covering around half of their existing shorts. Credit: following the widening in spreads, CTAs have sharply reduced their credit longs;