UPDATE 1-U.S. Treasury 5-year note futures' net shorts drop ahead of Fed meeting -CFTC

(Adds details, analyst comment, CFTC table) By Gertrude Chavez-Dreyfuss NEW YORK, Jan 21 (Reuters) - Speculators' net bearish bets on U.S. 5-year note futures, one part of the curve that reflects the market's interest rate expectations, dropped to the lowest level since September last year, Commodity Futures Trading Commission data showed on Friday. Investors pared back some of their short positioning ahead of a pivotal Federal Reserve meeting next week that is widely expected to flag an interest rate increase in March. U.S. 5-year note shorts fell to 217,174 in the week ended Jan. 18, from 299,657 contracts the previous week. "Total spec net positioning suggests investors are cautious on the belly (5-year) as we head into January FOMC (Federal Open Market Committee," said Penglu Zhao, quantitative rates strategist at TD Securities. The U.S. 5-year note futures price on Friday rose, after plunging to its lowest since January 2020 earlier this week. Net shorts on U.S. 10-year note futures, meanwhile, also declined to 271,442 contracts, the lowest since late December, from net shorts of 349,839 the prior week. After dropping in price to their lowest level since July 2019, U.S. 10-year note futures rebounded on Friday, which coincided with the slide in nominal 10-year yields. After hitting a two-year high of 1.9% earlier this week, 10-year yields have fallen 13 basis points. Meanwhile, U.S. 2-year futures' net longs fell to 38,636 contracts, the lowest since early December. U.S. 2-year notes also reflect market expectations on interest rates. The following is a table of the speculative positions in Treasury futures on the Chicago Board of Trade and in Eurodollar futures on the Chicago Mercantile Exchange in the latest week: U.S. 2-year T-notes (Contracts of $200,000) 18 Jan 2022 Prior week week Long 402,602 396,495 Short 363,966 344,678 Net 38,636 51,817 U.S. 5-year T-notes (Contracts of $100,000) 18 Jan 2022 Prior week week Long 352,444 314,572 Short 569,618 614,229 Net -217,174 -299,657 U.S. 10-year T-notes (Contracts of $100,000) 18 Jan 2022 Prior week week Long 461,290 413,462 Short 732,732 757,301 Net -271,442 -343,839 U.S. T-bonds (Contracts of $100,000) 18 Jan 2022 Prior week week Long 133,654 147,857 Short 181,150 212,895 Net -47,496 -65,038 U.S. Ultra T-bonds (Contracts of $100,000) 18 Jan 2022 Prior week week Long 66,240 76,368 Short 404,590 385,899 Net -338,350 -309,531 Eurodollar (Contracts of $1,000,000) 18 Jan 2022 Prior week week Long 773,690 815,291 Short 2,600,983 2,595,620 Net -1,827,293 -1,780,329 Fed funds (Contracts of $1,000,000) 18 Jan 2022 Prior week week Long 97,755 57,362 Short 110,029 124,916 Net -12,274 -67,554 (Reporting by Gertrude Chavez-Dreyfuss Editing by Chris Reese and Grant McCool)