COT: Broad commodity selling led by crude and gold; T-bond short hit fresh record COT: Broad commodity selling led by crude and gold; T-bond short hit fresh record COT: Broad commodity selling led by crude and gold; T-bond short hit fresh record

COT: Broad commodity selling led by crude and gold; T-bond short hit fresh record

Ole Hansen

Head of Commodity Strategy

Summary:  Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities, forex and bonds during the week to Tuesday, August 22. A week that saw risk adversity continue, driven by global growth concerns and a relentless rise in government bond yields. Elsewhere the dollar remained bid, forcing additional short covering from speculators while an unchanged commodity sector did little to prevent continued long liquidation, led by crude oil and gold.

Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities while in forex we use the broader measure called non-commercial.

What is the Commitments of Traders report?

The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class.

Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and other
Financials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and other
Forex: A broad breakdown between commercial and non-commercial (speculators)

The main reasons why we focus primarily on the behavior of speculators, such as hedge funds and trend-following CTA's are:

  • 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

Do note that this group tends to anticipate, accelerate, and amplify price changes that have been set in motion by fundamentals. Being followers of momentum, this strategy often sees this group of traders buy into strength and sell into weakness, meaning that they are often found holding the biggest long near the peak of a cycle or the biggest short position ahead of a through in the market.

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This summary highlights futures positions and changes made by hedge funds across commodities, forex and bonds in the week to last Tuesday, August 22. A week that saw risk adversity continue, driven by global growth concerns and a relentless rise in government bond yields which saw the yield on US 10-year Notes reach a fresh 16-year ahead of Friday’s Jackson Hole remarks from Jerome Powell, the Fed Chair. Elsewhere the dollar remained bid, forcing additional short covering from speculators while the commodity sector was mixed.

Commodity sector:

The Bloomberg Commodity index traded flat on the week with gains in metals and grains offsetting losses in energy and soft commodities. The leverage fund community, which includes hedge funds and CTA’s reacted to these mixed signals by cutting their overall net exposure by 134,000 contracts to 917,000 contracts, representing an $8 billion reduction in the nominal exposure to $73 billion. The 134k reduction was the result of 36k long liquidation and 98k contracts of fresh short selling. 

The biggest reductions were seen in crude oil, gold, corn, wheat, as well as coffee and cotton.

Crude oil and fuel products: Crude oil selling accelerated with the combined long being reduced by 30k to 380k, a five-week low, and split half and half between long liquidation and fresh short selling. The ULSD (diesel) long reached a November 2021 high while the natural gas long was cut 42%
Gold, silver and copper: A fifth week of gold selling cut the net long to a five-month low, while the gross short jumped to near a nine-month high, raising the risk of short covering. Silver flipped back to a net long as the price surged while the copper short was reduced by 17%.
In grains, the main change was the 46% increase in the corn short to an elevated 106k contracts as well as continued selling of wheat, resulting in the KCB RHW contract also flipping to a net short. Muted soybeans buying despite a 3% hot weather driven price spike.
Softs & Livestock: Broad selling of softs led by a 28% increase in coffee short and 19% reduction in cotton long.
In forex continued dollar strength saw speculators cut their dollar short vs eight IMM futures and the DXY by 12% to a six-week low at $13.8 billion. Biggest changes were buying of GBP ($0.6bn eq.) and selling of JPY ($1.2bn) and AUD ($0.7bn).
US bond futures: Leveraged fund selling of the major bond futures continued with the buyer being asset managers taking advantage of rising yields. The combined net short in the T-bond and T-bond Ultra futures reached a fresh record high at 1.1 million lots, representing a basis point value (DV01) of $194 million.


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