Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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COT: Dollar bears putting their eggs in one basket
Ole Hansen
Head of Commodity Strategy
Summary: This Commitments of Traders report highlights futures positions and changes made by speculators in forex, bonds and stocks up until last Tuesday, August 25. A week that saw a continued rally in U.S. stocks with the S&P 500 adding another 1.6%. Specs continued to sell dollars despite seeing the Greenback rise for a second week while bonds held steady ahead of Fed chair Powell's speech last Thursday
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.
This summary highlights futures positions and changes made by speculators in forex, bonds and stocks up until last Tuesday, August 25. A week that saw a continued rally in U.S. stocks with the S&P 500 adding another 1.6%. The dollar rose for a second week while bonds held steady ahead of Fed chair Powell’s speech last Thursday.
Following a brief pause, speculators resumed their dollar selling during the week to August 25, a week where the Greenback actually recorded broad gains against the ten IMM currency futures and the Dollar Index tracked in this. The net dollar short rose by $2.6 billion to reach $34.8 billion and we have to go back more than nine year to find a similar level of aggressive dollar selling.
As per the table below it is however clear, that speculators increasingly have put all their eggs in one basket and bet on further strength of the euro. The euro net-long reach a fresh record of 211,752 lots, the equivalent of €26.5 billion. The increase was primarily driven by short sellers throwing in the towel after the gross short saw a 11,992 lots reduction to a nine-year low at just 50,309 lots.
Elsewhere additional buying of the JPY and continued short covering of the CAD made up the rest of the buying while some selling of CHF and GBP reduced the overall impact.
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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