Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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COT: Commodities bought on U.S.-China deal hopes
Ole Hansen
Head of Commodity Strategy
Summary: COT on commodities in week to October 22 showed hedge funds buying futures across all three sectors. Buyers returned to oil, gold and silver albeit at a modest pace while grains once again saw the bulk of demand
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.
Speculators were net buyers in 18 out of the 24 commodity futures tracked in this report. Buying was spread across all three sectors with the bulk once again being concentrated on the key crops followed by energy and precious metals.
The reporting period to October 22 covered a week where the dollar dropped, stocks rose, and bond yields grinded higher with U.S.-China trade talks and Brexit continuing to dominate risk appetite.
Buyers returned to crude oil for the first time since mid-September but skepticism about WTI and Brent’s ability to break higher was highlighted by the gross-short which rose to 217k, the highest since January. Overall the combine net-long in WTI and Brent rose by 13k lots following a 52k lots reduction during the previous four weeks.
Buyers also returned to gold and silver albeit at a modest pace with both metals having struggled recently to break out of their established ranges. However, following a few weeks of net selling both contracts are now in a better position to react to price friendly news such as the attempt witnessed on Friday when both metals, albeit not that successfully, popped higher.
Bearish copper bets were cut by 9k lots to a 12-week low as the metal rose for a third consecutive week. The latest move higher in response to progress in U.S.-China talks and not least supply concerns as mining operation in top producer Chile have been disrupted by the worst social unrest in decades.
Long positions in soybeans extended further on increase Chinese demand and late harvest risks to supply. The wheat position flipped back to a net long just before the contract saw its first decline since August as winter-wheat planting began to improve in parts of the Great Plains.
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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