ATFX - Hedge funds cut short bets on US bank stocks! Is the crisis over or something else?

As bank share prices began to rise, according to a report by Goldman Sachs,Hedge funds abandoned their short bets on U.S. regional banks in late August in favor of the broader U.S. financial sector。

U.S. financial services firms, including banks, trading firms and capital markets firms, were the most sought-after stocks in the week ending Sept. 1, according to a report by Goldman Sachs' prime brokerage unit, which serves hedge funds.

The bank said,The ratio of long to short positions at U.S. regional banks has risen by 26% since hitting a one-year low in mid-July 2023,Traders were mostly short the banking sector at the time. A sell short or bearish bet refers to borrowing a stock and selling it, with the position squaring profits if its price falls.

Since the failures of Silicon Valley Bank, Signature Bank, and First Republic Bank,The U.S. regional bank stock index has rallied about 20% from a two-year low hit in May.。

U.S. Treasury Secretary Janet Yellen said in May that almost all banks had access to ample liquidity, but she warned that,Profit pressures could lead to consolidation in the banking sector.

The Goldman Sachs report shows that since mid-July,Short bets on large U.S. banks have also decreasedThe hedge fund's long position relative to its short position increased by about 14%.

Goldman Sachs said most of the buying of US regional banks had been driven by hedge funds buying back shares borrowed for short selling, known as short covering.

The report says that across the U.S. financial services industry,Hedge funds' August bets were net long。

The industry typically includes companies such as large banks, savings and loan companies, asset managers, credit services, and investment brokerages.