Managed Futures Exposure to Treasuries Historically Negative

In March of this year, the team at PivotalPath published a note surrounding the historic rally in Treasuries and its effect on Managed Futures.  As a reminder, in the span of eight trading days between March 8th and March 17th, 2023, there were massive moves across the US Treasury yield curve. The 2 Year rate fell from 5% to 3.8% (while the futures prices, moving inversely to yields, rose an unprecedented 2.4%) – the largest move within a single calendar month going back to 1998, when our Managed Futures data began.

The swift rally across the curve had a large negative impact on funds that were short Treasuries, including managed futures funds/CTAs.  Of note is that February 2021 represents a turning point for the Managed Futures sector, which has been historically mostly long bonds, until then.

The PivotalPath Managed Futures Index (PPMFI) finished the month of March down 4.7%. However, our model estimates the intra-month drawdown reached 10% peak to trough. This is consistent with the SG CTA Index, which lost ~9% between March 8th and March 17th.  For perspective, the loss over a handful of trading days represents more than 50% of PPMFI’s gain for all of 2022 and would represent the largest calendar month loss in our data going back to January of 1998.

Our team revisited our analysis of managed futures funds and their exposure to Treasuries to see what if anything has changed since March.


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