Growing bets on further rises in US Treasury yields are increasing the risk of a rapid reversal if incoming economic data points to a sharper-than-expected slowdown, according to a report by Bloomberg citing comments from market strategists.

The build-up in bearish positioning comes as Treasury yields have climbed to multi-year highs, with traders now focused on a series of economic indicators that could challenge the prevailing view that rates and yields will remain elevated.

The key tests this week include the Federal Reserve's preferred inflation gauge on Wednesday and September employment data due at the end of the week. Economists expect the jobs figures to show that hiring slowed last month, potentially providing a catalyst for investors to unwind short positions if the data comes in materially weaker than expected.

Futures positioning has expanded significantly in recent weeks. Open interest in five-year Treasury futures has increased in 11 of the past 12 trading sessions, while the equivalent measure for 10-year contracts has risen in 13 of the past 14 sessions, according to CME data.

The increase has coincided with a renewed rise in yields across the Treasury curve, suggesting that much of the new futures activity has been driven by investors positioning for further weakness in government bonds.

Commodity Futures Trading Commission data showed asset managers increased their short exposure to 10-year Treasury futures by more than 100,000 contracts in the week ended 22 September, marking one of the largest weekly additions since 2023.

Bank of America strategists, including Meghan Swiber, said futures positioning remained tilted towards higher yields, with short positions still profitable across short- and intermediate-duration maturities.

The pressure on Treasuries intensified on Tuesday, when 30-year yields reached their highest level since 2002. A heavy pipeline of corporate bond issuance has added to the supply burden facing fixed-income markets, while higher energy prices have reinforced concerns about inflation and helped underpin the latest wave of bearish Treasury positioning.

Across five- and 10-year futures, the additional risk accumulated since the beginning of last week equates to roughly $32 million per basis point, or about $75 billion of the current five-year Treasury cash market exposure.

Not all of the activity necessarily represents outright bearish bets. Some of the new futures positions may be linked to basis trades against cash Treasuries, while asset managers may also be using futures to hedge existing bond portfolios.

Nevertheless, the increasingly crowded positioning leaves the market vulnerable to a short squeeze if economic data begins to undermine expectations for persistently high yields. Weak employment figures or more dovish signals from Federal Reserve officials could prompt investors to close bearish positions, potentially driving a rapid decline in yields.

Economists surveyed by Bloomberg expect US employers to have added about 90,000 jobs in September, following a stronger-than-anticipated increase of 162,000 in August.

Other rates-market indicators also point to significant positioning activity.

A weekly JPMorgan client survey showed investor positioning was broadly unchanged in the week through 28 September, with outright long positions remaining at their highest level since November.

Options activity in Secured Overnight Financing Rate contracts has meanwhile been concentrated around several key strikes. Across December 2026, March 2027 and June 2027 contracts, significant new risk has accumulated around the 96.625 and 97.375 strikes, including sizeable demand for June 2027 96.625/97.375 call spreads.

Open interest has also increased around a number of December 2026 put strikes, reflecting demand for structures designed to benefit from further moves in short-term rates. At the same time, traders have reduced exposure around the 95.75 strike, with some of the liquidation involving purchases of December 2026 95.75/95.9375 call spreads.

The 97.00 strike remains the most heavily populated across the December 2026, March 2027 and June 2027 SOFR contracts, driven in part by substantial trading in March 2027 calls. June 2027 calls also account for a significant share of open interest at the strike, while positioning remains elevated around 96.50, particularly in December 2026 calls.

Treasury options markets are also reflecting continued demand for protection against further increases in yields. The premium for hedging long-bond futures has fallen sharply over the past week, leaving put options relatively more expensive than calls and indicating greater demand for downside protection.