Commitment Of Traders This Week, Hedge Fund Positions

Following futures positions of non-commercials are as of December 15, 2020.

10-year note: Currently net long 27.4k, down 1.8k.

Covid-19 vaccine or not, Fed Chair Jerome Powell is not wearing rose-colored glasses as far as the US economy is concerned for the first half next year. The second half, however, should see strong growth, he says. Speaking to the press at the end of the year’s last FOMC meeting Wednesday, he once again highlighted the need for fiscal stimulus. If the need be, the Fed would adjust its quantitative easing program, but for now, would purchase at least $120 billion/month in US treasury bonds and mortgage-backed securities. The central bank is between a rock and a hard place (more on this here).

Wednesday, the 10-year treasury yield tried to rally, tagging 0.95 percent intraday but ending the session slightly lower to 0.92 percent. Rates have not been over a percent since March. Bond bears (on price) have been denied at that level several times since June, including this month and last. On the 4th this month, the 10-year yielded as much as 0.99 percent before reversing lower. With the Fed spending as much as it is in purchasing these securities, a breakout is proving hard to come by. Friday, it closed at 0.95 percent.

30-year bond: Currently net short 216.4k, down 14.1k.

Major economic releases for next week are as follows. Happy Holidays!

GDP (3Q20, final estimate), corporate profits (3Q20, revised) and existing home sales (November) will be published on Tuesday.

The second estimate showed the US economy grew at an annual rate of 33.1 percent in 3Q. This followed back-to-back contraction of 31.4 percent in 2Q and five percent in 1Q.

The first estimate showed corporate profits with inventory valuation and capital consumption adjustments surged 27.1 percent quarter-over-quarter in 3Q to $2.32 trillion – a new record. In 1Q and 2Q, profits tumbled 12 percent and 10.3 percent, in that order.

Sales of existing homes rose 4.3 percent month-over-month in October to a seasonally adjusted annual rate of 6.85 million units. Sales languished at 3.91 million units in May.

Personal income/spending (November), new home sales (November) and the University of Michigan’s consumer sentiment index (December, final) are due out Wednesday.

In October, core PCE, which is the Fed’s favorite measure of consumer inflation, decelerated to year-over-year growth of 1.41 percent from September’s 1.56 percent. The last time inflation grew with a two handle was in December 2018.

October sales of new homes edged lower 0.3 percent m/m to 999,000 unis. September’s 1.002 million was the highest since November 2006.

Preliminarily, December consumer sentiment increased 4.5 points m/m to 81.4. The post-pandemic low of 71.8 was recorded in April.

Thursday brings durable goods orders (November). In the 12 months to October, orders for non-defense capital goods ex-aircraft – proxy for business capex plans – increased 6.2 percent to $70.1 billion (SAAR) – a new high. Earlier in April, orders were down to $61.3 billion.

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