Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Head of Commodity Strategy
Summary: The non-commercial dollar long against ten IMM currency futures saw a small reduction from the highest level since December 2015. The $0.6bn reduction to $34.5bn was driven by an 8% reduction in the JPY short on renewed trade war concerns and falling equities.
The euro net-short meanwhile expanded by 561 lots to 106k lots, the highest since December 2016.
Combined dollar position against ten IMM currency futures;
In fixed income leveraged funds kept up the selling pressure in 2’s with the net-short reaching a fresh record while selling of 10’s were being offset by buying of T-bonds
The Cboe VIX received a great deal of attention as it surged in response to renewed stock market weakness. Especially the record short raised concerns about a February 2018 style blowout. In the end the weakness in stocks were orderly and so was the reduction of short VIX positions which up until last Tuesday was cut by 30k lots to 150k lots.
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