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 Commitments of Traders reports highlight speculators positions and changes made during the week to August 4 in FX, bonds and stocks. Appetite for risk during this period remained strong with dollar weakness and rising negative real yields feeding a rise in prices across global asset markets.
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 such as hedge funds and CTA’s across forex, bonds and stocks up until last Tuesday, August 4. Appetite for risk during this period remained strong with dollar weakness and rising negative real yields feeding a rise in prices across global asset markets. The S&P 500 Index added 2.7% to reach a fresh cycle high while the dollar weakened further against a basket of major currencies. The yield on U.S. ten-year notes dropped 7 bp to 0.50%, thereby supporting a further fall in real yields to a fresh record low at -1.06%.
Continued dollar weakness, albeit at a slowing pace, helped boost the net-short against ten IMM currencies and the Dollar Index to a nine-year high at $29.5 billion. However, just like the previous five weeks the expanding dollar short position was almost solely driven by another rise in the euro net-long to a fresh record of 180,648 lots (€22.6 billion). The 15% increase occurred as the cross challenged and eventually later in the week retraced from €1.19.
Other noticeable changes were a rise in the Swiss franc net-long to 11,660 lots, the highest since March 2014 as well as an almost doubling of the Canadian dollar short to 23,195 lots.
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)