The End Game has arrived
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COT: Speculators bought dollars and sold bonds last week
Ole Hansen
Head of Commodity Strategy
Summary: In the week to December 3 speculators bought dollars at the expense of EUR and JPY. This in response to Trump talking about delaying a trade deal until after the US election. The VIX short meanwhile only saw a small reduction despite last Tuesday's volatility spike.
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.
The buying of dollars against ten IMM currency futures extended to a fourth consecutive week. Including the dollar index, the gross dollar long rose by $0.6 billion to $22.1 billion, a seven week high. Most noticeable sales were EUR and JPY while short-covering helped reduce bearish bets on GBP, AUD and NZD.
In EM currencies the weakest Brazilian Real on record helped drive the net short to the highest level since the contract was introduced in 2015. The MXN net long was reduced by 4% but at the equivalent of $3.3 billion it remained the second most popular long after the Greenback
Leveraged fund positions in bonds, stocks and VIX
Leveraged fund selling was seen across the US yield curved from Fed Funds futures to T Ultra Bonds. Measured as the dollar value of a one basis point move (DV01) the net short jumped by $21 million.
In stocks the Cboe VIX short was reduced for a second week. But interestingly the spike in volatility last Monday and especially Tuesday, when Trump talked about delaying the trade deal, only helped trigger a 5% reduction to 199,312 lots. While the short position (-16k) was reduced it was surprising to see the long position (-5k) being reduced as well.
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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