Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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COT: Agriculture spec short on the rise; gold buying resumed
Ole Hansen
Head of Commodity Strategy
Summary: Changes in speculative positions held by funds across 24 commodity futures during the week to August 20. Speculators were broad-based sellers of agriculture commodities with funds holding net-short positions in all but a couple. Gold and silver saw fresh buying while oil was mixed.
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.
Speculators were broad-based sellers of agriculture commodities with funds holding net-short positions in all but a couple. Last week the combined net-short across grains, softs and livestock reached 169k lots with cocoa, live cattle and not least corn seeing most of the selling. Precious metal buying resumed ahead of key risk events from FOMC minutes to Fed Chair Powell's speech at Jackson Hole. Crude oil was mixed with WTI buying seen ahead of Friday's announcement that China would slap a 5% tariff on US crude oil imports from September.
Of the three major crops corn took the biggest hit. After having sold 101k lots during the week funds are once again holding a net-short position. Ample supply, despite one of the wettest growing seasons on record, together with worries about demand has kept key crops under pressure during the growing season. Ahead of the tariff announcement last Friday speculators had sold 6k lots of soybeans.
The small price setback in gold and silver did nothing to dampen the bullish sentiment. The net-long in gold rose by 7k lots on a combination of short-covering and fresh longs while the 27% jump in silver longs was primarily driven by short-covering. HG Copper was bought for a second week and during this time the net-short has been reduced by 17%, primarily on short covering. The trade war escalation on Friday helped trigger renewed selling with the price closing at the weakest level since May 2017.
Being just one tariffs headline away from renewed weakness the recent recovery in crude oil failed to trigger much excitement with long and short positions being reduced in both WTI and Brent. The combined net long was close to unchanged given the continued switch from Brent to WTI crude oil. China’s announcement on Friday that a 5% tariff would apply on US crude oil imports from September occurred after short-sellers in WTI had cut their gross-short by 25%, the biggest retreat in year
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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