Second Point's active view on U.S. rates, fiscal issuance, and credit-market plumbing.
Short the belly of the Treasury curve (7–10Y) against the 30-year — the Fed is priced for a hike, and the belly is the least crowded place to own that view.
Markets put roughly 66% odds on a 25bp hike at the 15–16 September FOMC — not a cut — with August core CPI at 2.4% y/y and gasoline up 3.9% in the month driving over a third of the headline print. Positioning, read correctly, points the other way from where this call was first drawn. CFTC net-short positioning in 2Y and 5Y futures sits at the 94th and 91st percentile of its own 52-week range — and because these are net-short positions, a high percentile means the shorts have been covered, not piled on: 2Y net-short has shrunk from −1.75M contracts at its heaviest to −944,839. Front-end positioning is light. The genuinely heavy short sits at the long end, where UST BOND and ULTRA UST BOND are both at the 7th percentile — within a whisker of their most-short reading in a year — with SOFR-3M at the 2nd percentile and flagged EXTREME. The 10Y sits mid-range at the 35th. Treasury did increase long-end buyback sizes on 9 September, which is a technical bid for the same 30-year sector carrying that crowded short.
FOMC decision 15–16 September; quarterly refunding announcement in early November. Auction demand has not broken — the 9 September 10-year cleared at 4.834% with a 2.71 bid-to-cover and 79.2% indirects — so this is a repricing of rate expectations, not a buyers strike.
**Correction (2026-09-12):** an earlier version of this page read the CFTC 52-week percentile as if a high number meant a crowded short. It means the opposite for a net-short contract. The positioning text below has been corrected; the resulting call is under review and has not yet been re-derived from the corrected data. A dovish hold on 16 September would squeeze the heavy long-end short hardest, since that is where positioning is actually stretched. WTI falling back under $85 within 30 days removes the driver behind the August CPI beat. Two consecutive core CPI prints below 0.2% m/m undercut the reacceleration case. And if SOFR−IORB breaches +15bp, funding stress would likely force the Fed to slow QT — bullish duration regardless of inflation. Note that ON RRP is effectively drained at $5.25bn, so the usual shock absorber is gone.