CTA equity buying slows as unwind risk builds on downside: BofA

Bank of America warns that trend-following CTAs have sharply slowed equity buying — adding roughly $2bn of new equity longs last week — and that the scope for further incremental buying is limited. BofA says downside “unwind” triggers sit about 3% below the S&P 500 and ~5% for the Russell 2000 (wider in Europe/Japan), and if breached CTAs could sell roughly $100bn globally (about $50bn U.S., $35bn Europe, $15bn Asia). Fixed-income trend followers hold large short positions in U.S. Treasury futures (2- and 5-year shorts near capacity). FX positioning has flipped to some dollar buying versus the euro, pound and Canadian dollar. Commodities exposure shows potential gold selling (nearest trigger ~2.6% below current levels) while CTAs remain long oil, aluminum and soybean oil. Overall, the note raises downside risk to risk assets from systematic flow unwinds and highlights cross-asset vulnerabilities if volatility picks up.