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Poor sentiment in the bond market

by Sentimentrader
2026-07-01
Hedge funds are cutting bond exposure close to -40% while the Stock/Bond Ratio reverses from extreme highs. Historically, this contrarian setup fuels a multi-month Treasury (TLT) rally but signals near-term weakness for the S&P 500.

Key points

  • Hedge funds are quickly scaling back their exposure to bonds, now getting close to -40% exposure.
  • The Stock/Bond Ratio is reversing from extreme highs, a dynamic that historically signals a multi-month rally for Treasuries (TLT) but near-term weakness for the S&P 500.
  • Long-duration bonds are entering a historically favorable seasonal window, though upcoming macroeconomic data will dictate the immediate trajectory of Fed policy.

Funds are exiting bonds

Hedge funds are quickly scaling back their exposure to bonds, now getting close to -40% exposure. Exposure has certainly gotten much more extreme, and those extremes have been effective contrary signals. Historically, this dynamic materializes near major bottoms in TLT price action.

Poor sentiment in the bond market

With equities performing exceptionally well in recent weeks while the bond market languishes, the Stock/Bond Ratio has sustained extremely elevated levels, only recently beginning to reverse course.

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