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Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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COT: Growth concerns weigh on all sectors
Ole Hansen
Head of Commodity Strategy
Summary: Speculators were broad-based sellers of commodities last week as the uncertainty regarding the outlook for global growth and with that demand for commodities continued to take its toll
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: Commodity report for the week ending June 18, click here.
Money managers, speculators or hedge funds as most tend to call them sold commodity futures during the week ending August 13. The net-long across 24 major futures, including the European based Brent and gas oil contracts, dropped by 27% to 313k lots, a four months low. While bonds have raced higher, commodities with gold and silver the two most noticeable exceptions, have all been struggling amid raised growth concerns and ample supply.
Gold’s phenomenal rally to a six-year high was tested last week following the US tariff announcement. The violent $55/oz retracement from $1535/oz was more an indication of how crowded the trade has become than a change in the fundamental outlook. Gold and not least silver were sold and in gold it triggered a small 2% reduction on the week to 278k lots, some 9k lots below the 2016 record.
Just like $1380/oz was the support following the July breakout the next support level to focus on now is the $1480-85/oz area with a break below signalling a period of consolidation but at this stage not a reversal.
The record copper short was reduced by 8% with speculators reducing short positions in response to the break and subsequent recovery back above key support. Platinum’s discount to gold widened further resulting in a 10% reduction in the net-long to just 7k lots.
Buying of WTI and selling of Brent continued as the spread between the front month contracts has dropped below $4/b from above $10/b back in early June. While WTI has benefited from new pipelines transporting crude away from Cushing, the delivery hub for WTI futures, Brent crude, the global benchmark, has suffered relatively more due to the mentioned growth and demand concerns.
In the agriculture space grains were mixed following the August WASDE report which helped sent corn sharply lower while soybeans got some relief from Trump’s decision to delay the 10% tariff hike on some products until December. In soft commodities cocoa, sugar and coffee were all sold amid ample supply and demand worries
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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