Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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COT: Spec long falls to 18-month low on trade, EM fears
Ole Hansen
Head of Commodity Strategy
Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.
To download your copy of the Commitment of Traders: Commodities report for the week ending September 4, click here.
Hedge funds cut bullish commodity bets by 5% to 880,000 lots, an 18-month low, in the week to September 4. Trade war, Iran sanctions, and EM worries remained some of the key drivers weighing on sentiment. The energy sector stood out with the Iran sanctions threat to supplies helping drive oil higher. Metals were sold amid worries about global demand while grains were sold ahead of the expected arrival of a huge US crop. Soft commodities were mixed with the weak BRL continuing to attract selling of sugar and coffee.
Crude oil and products were bought for a second week as the Iranian sanctions-linked threat to supplies helped override the risk to growth and demand from the current EM slowdown. Interestingly enough, both long and short positions were added with the latter initially being rewarded following Brent’s failure to break above $80/barrel.
Gold was sold again with the net-short hitting a record 79,000 lots. The change was driven by long liquidation after it failed to hold onto recent gains above $1,200/oz. Last Friday’s strong job report and jump in wages did nothing to support sentiment. For now though the focus remains on the dollar and not least the yuan which is showing renewed weakness (gold negative) ahead of the expected announcement of additional US tariffs on Chinese imports.
Silver was aggressively sold with the net-short jumping by 38% to 47k lots, a new record, after being dragged lower by its link to industrial metals. This resulted in silver hitting a 2-1/2 low against the dollar and a 23-year low against gold.
HG copper was sold on worries about the robustness of the Chinese economy and the impact of its widening trade war with the US. These worries also saw platinum’s record short extend further with the price discount to gold hitting a record $420/oz.
All three major crops, led by soybeans, were sold with the combined net-short rising to 77,000 lots, not far from the five-year average for this time of year at -53,000 lots. The main drivers being expectations of a massive US crop, Chinese tariffs on US soybeans and easing worries about Russian export restrictions.
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