Asset management companies are offloading long-duration US Treasury futures contracts, a sign that passive selling is underway as cash yields hover near multi-year highs.

According to data from the US Commodity Futures Trading Commission (CFTC), fund management institutions reduced their long positions in ultra-long bond futures over the two weeks ending October 6, cutting risk exposure by roughly $27 million per basis point 鈥?a scale roughly equivalent to $38 billion in outstanding 10-year cash bonds. Over the same period, as the 30-year yield climbed to a 24-year peak of 5.68%, futures contract prices fell sharply.

This is part of a months-long selling wave driven by concerns over the inflationary impact of a US-Israel war against Iran, deteriorating fiscal conditions across global governments, and an AI boom that is adding fuel to an economy the Federal Reserve is already trying to cool.

The latest CFTC data released on Friday also provided fresh evidence that technical factors are contributing to the recent decline in long-end bonds. The data showed signs of passive selling by asset management companies, whose portfolio durations were stretched by underlying securities mechanics involving the cheapest-to-deliver bond.

When the basket of deliverable securities changes and the cheapest-to-deliver (CTD) security begins migrating toward longer-dated bonds, so-called "switch risk" dynamics are triggered. This can lead to passive selling.

Open interest, which represents the new risk exposure held by traders, also confirms the deleveraging trend in ultra-long bond futures. The data shows that open interest in ultra-long bonds has declined for seven consecutive trading days, reducing aggregate risk by about $20 million per basis point. The rise in yields over the same period also indicates that long positions are being closed out.