Flows & Liquidity: An overhang of long duration and spread exposures

This Flows & Liquidity report finds a bifurcated bond positioning picture: quant funds have benefited over the past month from a build-up of short duration exposures, while discretionary managers have been scrambling to contain previous overhangs of long duration and spread exposures. This raises two-way risk for bond markets—either mean reversion signals induce quant funds to take profit and reverse some of the recent rise in bond yields, or discretionary managers amplify the negative momentum by cutting their duration and spread overhangs further;