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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: Speculators cut bearish EUR bets; VIX short on the rise
Ole Hansen
Head of Commodity Strategy
Summary: Speculators ditched dollar longs as buyers returned to EUR and GBP. The Cboe VIX short once again approaching record territory as market complacency reigns.
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.
Following five weeks of solid dollar buying speculators made a U-turn and cut bullish bets by 28% to $15.2 billion. While the dollar selling during the week to October 22 was broad-based, over half of the reduction came from a 34% reduction in the EUR net short. Another major contributor was GBP on Brexit deal hopes while bullish CAD bets reached a 20-months high.
As a sign of the continued risk-on across markets the JPY net-short was boosted by 11.5k lots to 18k lots, the most bearish since June.
Leveraged fund positions in bonds, stocks and VIX
The S&P 500’s attempt to reach a fresh record helped drive a 10% increase in the non-commercial Cboe VIX short. At 171k lots it is now just 9k below the April record.
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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