COT: Dollar mixed; T-bond record short extends further
Head of Commodity Strategy
Summary: The Commitments of Traders report highlight speculators positions and changes made during the week to October 20 in FX, bonds and stocks. A mixed week for the dollar which led some light short covering while the leveraged fund short in U.S. T-bonds futures hit a fresh record
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 20.
A week where the lack of progress on a U.S. stimulus package and a continued rise in global Covid-19 cases helped sent the S&P 500 lower by 2%. The Dollar Index meanwhile dropped 0.5% while long-end bond yields ticked higher to reach a four-month high.
It was a mixed week in currencies with the dollar trading up against some and lower against others of the ten IMM currency futures tracked in this. Overall the combined dollar short was cut by 1% to $27.5 billion with selling of EUR, JPY and CAD being off-set by buying of CHF, GBP and AUD.
The reflation trade continued to gain momentum during a week where long end U.S. bond yields hit a four-month high. In response to this the leveraged fund net short in U.S. T-Bonds reached a new record of 447,314 lots, representing a nominal value of $78 billion.
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.