(Reuters) Hedge funds raised their bets last week on a flatter U.S. yield curve and a stronger dollar. Their bond bet shows signs of coming good as the yield curve moves towards inversion, but their FX wager? Not so much.The gap between two- and 10-year U.S. bond yields is just 25 basis points, the narrowest in over a decade. Every time it has turned negative since the early 1970s, recession has followed.
Whether “this time it’s different” is the subject of intense debate. Hedge funds and speculators had built up a record net short position in 10-year Treasuries futures earlier this month, but reduced that fairly substantially last week.