Traders are ramping up wagers that U.S. Treasury yields will keep climbing from roughly two-decade highs, raising the risk that these positions could unwind abruptly at the first clear sign of an economic cooldown.

With that in mind, bond traders are focused on a slew of key data due this week, including the Federal Reserve's preferred inflation gauge on Wednesday and the nonfarm payrolls report on Friday.

Over the past few weeks, open interest in 5-year and 10-year Treasury futures contracts has risen sharply. Data from CME Group shows traders added to 5-year contract positions on 11 of the past 12 trading days, and boosted 10-year contract positions on 13 of the past 14 trading days. Yields across multiple maturities surged to multi-year highs this week, indicating that the fresh activity in the futures market was dominated by shorts.

According to Commodity Futures Trading Commission data, asset managers added more than 100,000 bearish 10-year Treasury futures contracts in the week through Sept. 22, one of the largest weekly increases since 2023.

"Futures market positioning remains skewed toward higher yields, with short positions in short- and intermediate-maturity instruments still profitable," Bank of America strategists including Meghan Swiber wrote in a report. "Asset managers continued to add bearish Treasury positions, especially in the intermediate-to-long end," while commodity trading advisors also remained "resolutely short Treasuries."

On Tuesday, the months-long slump in U.S. Treasuries deepened further, with 30-year yields rising to the highest level since 2002, dragged down by a large wave of corporate bond issuance. More broadly, elevated energy prices have intensified inflation pressures, a major catalyst behind the surge in short positions.