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 short reduced in rangebound market
Ole Hansen
Head of Commodity Strategy
Summary: The Commitments of Traders reports highlight speculators positions and changes made during the week to September 15 in FX, bonds and stocks. Risk appetite returned with the S&P 500 Index rising by 2.1% while the dollar traded lower and bonds were unchanged. Once again the biggest impact came from another reduction in the elevated short position against the euro.
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, September 15. Risk appetite returned during the week with the S&P 500 Index rising by 2.1% following the biggest correction since the March pandemic low. A flurry of deal activity and continued speculation about the timing of a coronavirus vaccine together with better-than-expected Chinese data all helped give sentiment what looked like a temporary boost given how markets closed on Friday. The dollar traded lower by 0.4% with losses seen against all its peers with British pound being the most noticeable exception.
Despite broad dollar weakness, speculators still reduced bearish bets for a fourth consecutive week against all but one of the ten IMM currency futures tracked in this report. Overall the dollar short was cut by 4% to $32.4 billion and once again the biggest impact was another reduction of short position against a rangebound euro. From a record high three weeks ago, the euro long has since been cut by 16% to 179k lots or €22.3 billion.
Selling also hit Sterling which saw an 82% reduction in the recently established long thereby cutting the net long down to just 2.2k lots. The Dollar Index net short reached a near 3 year high after rising by 43% to 8.2k lots. Elsewhere the most noticeable changes was the sharp reversal back to an AUD net-long of 16.2k lots, an 18-month high, and a 200% jump in the MXN long to a six month high.
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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