Looking At The Future Through CoT This Week

Following futures positions of non-commercials are as of September 14, 2021.

10-year note: Currently net long 129.4k, up 128.6k.

The FOMC meets next week. This will be the 6th scheduled meeting this year, and two more remain – one in November and the other in December.

Next week’s meeting will accompany a summary of economic projections. It will be interesting how they view the US economy, jobs and inflation are progressing and where they think they are headed. Even more interesting is what they will say about tapering. At the Jackson Hole symposium late last month, Chair Jerome Powell indicated that the central bank would begin to taper its bond purchases toward the end of the year.

Currently, the Fed buys up to $80 billion in treasury notes and bonds and $40 billion in mortgage-backed securities every month. It is sitting on $8.45 trillion in assets, twice what it held in early March last year. That is a lot of stimulus sloshing around in the system.

After Powell made those comments, August’s jobs report came in much weaker than expected; consumer inflation, too, rose less than expected last month. If FOMC doves are looking for a reason to delay tapering, the recent softness in data has given them one.

As things stand, the 10-year T-yield (1.37 percent) does not seem bothered by prospects of tapering. It continues to struggle to break through low-1.40s. In fact, rates have faced stiff resistance at high-1.30s since August 12, including Friday. Maybe the long end of the yield curve is focused more on how foreigners have been warming up to treasury notes and bonds in recent months (more on this here).

Non-commercials this week aggressively added to net longs in 10-year note futures.

30-year bond: Currently net short 60.6k, down 23k.

Major economic releases for next week are as follows.

The NAHB Housing Market Index (September) comes out on Monday. Homebuilder sentiment dropped five points month-over-month in August to 75 – a 13-month low. The index peaked at 90 last November, tripling since hitting a post-pandemic low of 30 in April last year.

Housing starts (August) are due out on Tuesday. July starts declined seven percent m/m to a seasonally adjusted annual rate of 1.53 million units – a three-month low.

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Disclaimer: This article is not intended to be, nor shall it be construed as investment advice. Neither the information nor any opinion expressed here constitutes an offer to buy or sell any ...

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