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 COT reports highlight speculators positions and changes made during the week to April 21 in FX, bonds and stocks. The period covered the across markets reaction to the dramatic slump in crude oil prices. Many weeks of euro buying getting ripe for a challenge as Europe struggle to find a united front to combat the covid-19 fallout.
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 below summary highlights futures positions and changes made by speculators across forex, bonds and stocks up until last Tuesday, April 21. This period covered the historic collapse in crude oil which helped drive stocks and bond yields lower and the dollar higher.
Despite strengthening during the week, the dollar continued to be sold, albeit at a much reduced pace than the previous eight weeks. During this time the net dollar long against ten IMM currency futures and the Dollar Index has gone from a $18.6 billion long to the current $9.1 billion short. However, the main and almost sole driver behind this change has been the turnaround in euro. Since late February speculators bought 201k lots (€25 billion equivalent) with the net position going from an elevated short to the biggest long positions since June 2018.
Overall the position changes were limited during a week where the dollar showed strength against all the currencies tracked in this report. The two biggest changes were selling of Sterling (4.6k lots) and buying of Japanese yen (3.3k lots)
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