Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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COT: Speculative dollar shorts cast a nervous eye to the euro
Ole Hansen
Head of Commodity Strategy
Summary: The COT reports highlight speculators positions and changes made during the week to April 21 in FX, bonds and stocks. The period covered the across markets reaction to the dramatic slump in crude oil prices. Many weeks of euro buying getting ripe for a challenge as Europe struggle to find a united front to combat the covid-19 fallout.
Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.
The below summary highlights futures positions and changes made by speculators across forex, bonds and stocks up until last Tuesday, April 21. This period covered the historic collapse in crude oil which helped drive stocks and bond yields lower and the dollar higher.
Despite strengthening during the week, the dollar continued to be sold, albeit at a much reduced pace than the previous eight weeks. During this time the net dollar long against ten IMM currency futures and the Dollar Index has gone from a $18.6 billion long to the current $9.1 billion short. However, the main and almost sole driver behind this change has been the turnaround in euro. Since late February speculators bought 201k lots (€25 billion equivalent) with the net position going from an elevated short to the biggest long positions since June 2018.
Overall the position changes were limited during a week where the dollar showed strength against all the currencies tracked in this report. The two biggest changes were selling of Sterling (4.6k lots) and buying of Japanese yen (3.3k lots)
Leveraged fund positions in bonds, stocks and VIX
What is the Commitments of Traders report?
The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.
In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.
In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.
Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.
They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.
The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.
In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.
In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.
Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.
They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.
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