Short-term borrowing costs for US Treasuries have risen significantly as investors increasingly use two- and five-year notes to establish short positions. This surge in demand to borrow specific securities has driven repo rates higher.
On September 18, the two-year Treasury yield increased by 7 basis points to 4.74%, marking its highest point since mid-2024. Simultaneously, 10-year yields reached levels not observed since 2007.
Data from a JPMorgan client survey for the week ending September 14 indicates that short positions in Treasuries grew by 10 percentage points in one week, reaching 19% of clients. This represents the largest weekly increase since 2019.
During the same period, net long positioning declined to its lowest level since May, while neutral holdings decreased from 56% to 48%. Markets had anticipated a 90% probability of a 25-basis-point Federal Reserve rate hike on September 16.
