What's crowded? Bond longs or shorts?

In a bizarre way, the enormous treasury futures short exposure of hedge funds might actually be the manifestation of an overextended long bond bet in the market.

In recent months you have often heard me claim that the long bonds trade is hopelessly overcrowded which might cause trouble ahead. With a $2tn deficit, the US Treasury is effectively selling fresh bonds into a void. The Fed does not want to buy. Foreign players can’t absorb it because their currencies are under pressure. And private investors are maxed…