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Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
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Head of Fixed Income Strategy
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COT: GBP and MXN bought while EUR sold ahead of FOMC
Ole Hansen
Head of Commodity Strategy
Summary: According to the latest COT report, the non-commercial dollar long against nine IMM currency futures was reduced by $1.1 billion to $25.4 billion during the week to March 19.
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: Forex report for the week ending March 19, click here
To download your copy of the Commitment of Traders: Financials report for the week ending March 19, click here
While currencies such as EUR, JPY and CAD were sold ahead of the Federal Open Market Committee meeting, speculators cut short bets on GBP by 62% to a nine-month low. The biggest short by remained the EUR which stayed close to its most elevated since December 2016.
To download your copy of the Commitment of Traders: Forex report for the week ending March 19, click here
To download your copy of the Commitment of Traders: Financials report for the week ending March 19, click here
While currencies such as EUR, JPY and CAD were sold ahead of the Federal Open Market Committee meeting, speculators cut short bets on GBP by 62% to a nine-month low. The biggest short by remained the EUR which stayed close to its most elevated since December 2016.
The Mexican peso reached a five-month high against the dollar last week and in response to this, the net-long reached a six-year high and it remains the second-biggest long after the dollar. Buying of the ruble, one of the best performing currencies this year, raised the net-long to a 28-month high.
Financials
Leveraged funds resumed selling ahead of last week’s dovish FOMC meeting, which triggered the biggest weekly yield drop in US 10-year notes since June 2016. Selling occurred across the curve with a small amount of short-covering in 10s and 10 Ultras being the exceptions. Asset managers hold most of the corresponding long but with (short) positions being so elevated the drive to reduce is likely to continue to add downward pressure on yields.
Leveraged funds resumed selling ahead of last week’s dovish FOMC meeting, which triggered the biggest weekly yield drop in US 10-year notes since June 2016. Selling occurred across the curve with a small amount of short-covering in 10s and 10 Ultras being the exceptions. Asset managers hold most of the corresponding long but with (short) positions being so elevated the drive to reduce is likely to continue to add downward pressure on yields.
Short-selling of the Cboe VIX Index jumped by 44% to 128k lots, a five-month high. The combination of falling volatility – until last Friday – and the futures curve trading in contango helped attract additional short selling.
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 advisers (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 advisers (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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