Hedge funds raced to cover their Treasury short positions ahead of the release of inflation data for December as speculation mounted about a looming recession and a slow down in rate hikes, according to a report by Bloomberg.

Hedge funds raced to cover their Treasury short positions ahead of the release of inflation data for December as speculation mounted about a looming recession and a slow down in rate hikes, according to a report by Bloomberg.

The report cites futures trading data from last week as showing that a combined 170,000 of 10-year note equivalents were covered by money managers, the biggest drop in bearish duration bets since September. 

The biggest cuts came in short bets in two- and 10-year note futures, as traders responded to expectations that the Federal Reserve will opt for a smaller 25 basis-point rate hike at the February meeting, rather than recent 50 basis-point increases.

JPMorgan’s latest Treasury client survey meanwhile, showed that in the cash space, investors are now the most neutral on duration since September 2011, implying uncertainty on the immediate path of Treasury yields has reached a peak.