A roller-coaster week for rates and the dollar did not stop large speculators adding to their already record-high short positions across the entire term structure.

USD Shorts have started to cover aggressively.

Driven mostly by additions to EUR shorts...

BUT, record bond shorts keep getting more record-setting.

From the shortest-end (ED futures) to the belly (5Y at record shorts)...

And the longest-duration 'ultras' also at record shorts...

Interestingly, as the Treasury curve has collapsed, it is clear from the chart below that large speculators are betting on curve steepening (reducing their shorts in 2Y TSY and adding to shorts in 10Y TSY) - so far it is failing miserably as the curve crashes to new cycle lows.

Putting this all together, large speculators have never been more short across the entire interest-rate curve - over $4 trillion notional bets in Eurodollars (short-term rates going higher) and around $117 billion notional equivalent short across the Treasury futures curve.

Large speculators are not the only ones having second thoughts about US Treasuries.

Foreign official demand for Treasuries continues to cool just as the U.S. is ramping up auctions to record sizes. As Bloomberg reports, the amount of U.S. government bills, notes and bonds held in custody at the Federal Reserve Bank of New York fell to $3.04 trillion as of May 9, the lowest since January and down from a record $3.11 trillion reached in March, data released Thursday show. Holdings have fallen for 7 of the last 8 weeks at the fastest pace since before the US election.

The dip may be a result of a combination of a “stronger USD that may be bringing intervention to support weaker foreign currencies, concerns over continued Fed tightening and some selling of U.S. Treasuries in response to geopolitical concerns,” Amherst Pierpont Securities global strategist Robert Sinche wrote in a note Friday.

The question is - are all these "investors" right? Is the most one-sided trade-positioning ever going to prove to be correct... and what happens when they are proved 'right' and start to unwind?

Judging by DoubleLine's Jeff Gundlach's favorite 10Y Yield indicator, Copper/Gold is signaling 10-Year yields should be 40bps lower.

Now that should shake out a few of the weaker hands in the record bond shorts.