With the Street expecting higher interest rates this year, it's no surprise to see a considerable short in the Treasury market.
But bond investors are the most short duration against their benchmark now than they have been since 2008, according to a recent Stone & McCarthy money manager survey.
As the Fed moved toward tapering its quantitative easing bond purchases, Wall Street became increasingly short Treasurys. Many strategist expect the 10-year yield to move to 3.5 percent or a bit higher this year. Investors are betting on an improving economy and expect the Fed to continue to unwind QE.
But what if there is more bad data—like last week's December jobs report—and rates move suddenly lower?
"That is the inevitable pain trade that this is revealing. In more generic terms, there are other things out there that supports this," said David Ader, chief Treasury strategist at CRT Capital. "The commitment of traders for example is also very short, especially in the 10-year sector."
(Read more: Shopping for winners in a trickier market)
Ader said even with the Fed tapering its purchases of Treasurys and mortgages, Treasurys could become attractive for investors who are focused on more richly priced spread products.
The Fed is paring back $10 billion in purchases this month, making purchases at the rate of $75 billion a month. It meets again at the end of January and is widely expected to reduce the purchases even more.
Investors short 10-year notes
"Historically speaking, Stone & McCarthy has been a reliable contrarian indicator," Ader said. "We like it when you have a confluence of supporting information."
Ader said many of the money managers who are short Treasurys are actually long corporates and could be attracted to Treasurys as yields become more attractive in a higher range.
BlackRock CEO Larry Fink said Thursday on CNBC's "Squawk Box" that the "Great Rotation" is actually within the bond market and that investors are moving to shorter duration instruments or high yielding corporates.
(Read more: BlackRock CEO sees 'great rotation' in bonds)
The Treasury said Thursday that foreign holdings of U.S. Treasurys fell by $3.4 billion in November, but official institutions, including central banks, were net buyers in the amount of $10.2 billion.
Treasury holdings by China and Japan, the two largest U.S. foreign creditors, increased by a combined $24.2 billion.
(Read more: Foreigners lose taste for U.S. assets)
—By CNBC's Patti Domm. Follow her on Twitter