Asset management institutions are offloading long-duration US Treasury futures contracts, a sign that forced selling is emerging as cash bond yields hover near multi-year highs.

According to data from the US Commodity Futures Trading Commission (CFTC), in the two weeks through October 6, the net long position held by asset managers in ultra-long Treasury futures fell by approximately $27 million on a per-basis-point risk basis.

That is equivalent to roughly $38 billion of the current benchmark 10-year US Treasury cash notes. Over the same period, futures contract prices dropped sharply as the 30-year Treasury yield climbed to a 24-year high of 5.68%.

This forms part of a months-long selloff in US Treasuries, driven by market concerns over the inflationary impact of US and Israeli strikes on Iran, deteriorating fiscal conditions among governments worldwide, and an artificial intelligence (AI) boom that is further stimulating the US economy even as the Federal Reserve tries to cool it down.

The latest CFTC data released on Friday further showed that technical factors are intensifying the recent decline in long-end US Treasuries. The data revealed signs of forced selling by asset management institutions after the cheapest-to-deliver (CTD) mechanism had already extended the duration of their portfolios.

So-called "switch risk" is triggered when the deliverable basket changes and the cheapest-to-deliver (CTD) begins shifting toward longer-dated bonds. This can lead to forced selling.

Open interest also confirms the deleveraging trend in ultra-long Treasury futures. Data shows that open interest in ultra-long Treasury futures has fallen for seven consecutive trading days, accumulating a decline of nearly $20 million on a per-basis-point risk basis.

The accompanying rise in yields over the same period also indicates that long positions are being unwound.