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, October 6.
This was the week where President Trump’s coronavirus diagnosis helped support the prospects both for stimulus and an easier election win by Joe Biden as he extended his advantage in opinion polls. In response to these developments, the S&P 500 traded higher by 1% while the dollar was slightly softer. The big move, however occurred at the far end of the U.S. yield curve, with yields on 10 and 30-year bonds surging to a four-month high.
Despite trading lower against all but one of the ten IMM currency futures tracked in this report, speculators still reduced bearish dollar bets by 7% to $28.9 billion.
The bulk of the reduction – as per the table below – was against the euro, where continued profit taking saw the net long being cut by 7% to a ten-week low at 174,308 lots or €21.8 billion. The Japanese yen long was reduced by 3,687 lots while most other changes were relatively small apart from the Dollar Index where the net-short was almost cut in half.
The mentioned reflation trade continued to gain momentum during a week where the the yield on U.S. 10-year and 30-year bonds both jumped by 10 basis points. In response to this the leveraged fund net short in U.S. T-Bonds reached a new record of 432,589 lots giving it a value of $75.4 billion. The almost by the Fed controlled nature of the front of the yield curve have seen speculators betting or hedging against rising inflation and rising bond yields further out the curve.
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.