A trader watches for the day’s final numbers on the floor of the New York Stock Exchange in New York October 15, 2014.

Analysis & Opinion

NEW YORK (Reuters) — The huge decline in open interest in U.S. bond and Eurodollar futures signaled a scramble on Wednesday to exit bearish bets on U.S. Treasuries and interest rates, which knocked benchmark 10-year yields to 16-month lows, according to data from CME Group Inc ( CME.O ).

Traders closed out nearly 581,000 interest rates and Treasury futures contracts worth $458.79 billion on the Chicago Mercantile Exchange and the Chicago Board of Trade.

Safe-haven buying of U.S. government debt has surged since last week on fears about the global economy. Weak U.S. data on Wednesday fed those fears, stoking a rush to cover prior short bets on rates and bonds.

Wednesday’s trading was extremely heavy, with 25.1 million futures and options changing hands.

The dramatic fall in U.S. Treasuries yields was largely the result of some large market players unwinding crowded trades in Treasury futures markets, Rick Rieder, chief investment officer of fundamental fixed income at BlackRock Inc ( BLK.N ), said late Wednesday.

The yield on U.S. 10-year Treasuries notes US10YT=RR fell as low as 1.865 percent in early Wednesday U.S. trading before closing at 2.129 percent, down nearly 8 basis points on the day, according to Reuters data.

Among all fixed income futures, open interest, or unsettled contracts, on CME Eurodollar futures <0#ED:> took the biggest hit. They fell 442,203 contracts to 11.53 million, preliminary CME data showed.

Among CBOT Treasury futures, open interest on five-year T-notes <0#FV:> declined 118,078 to 1.97 million.

That’s where the core positions were, and that’s where the adjustments happened, said Greg Adamsick, vice president of global futures and options at RCM Asset Management in Chicago.

Open contracts on CBOT two-year T-note futures <0#TU:> decreased 27,117 to 1.41 million.

CBOT T-bond contract’s <0#US:> open interest fell 13,081 to 888,436.

Open interest on CBOT ultra bond futures <0#AUL:> slipped 3,590 to 511.536.

The notable exception was CBOT 10-year T-note futures <0#TY:> whose open interest rose 23,088 to 2.82 million

(Reporting by Richard Leong; Editing by Chizu Nomiyama and Lisa Von Ahn)