Peek Into Future Through Futures, How Hedge Funds Are Positioned - Tuesday, Dec. 29

Following futures positions of non-commercials are as of December 22, 2020 (data was made public this Monday instead of last Friday due to the Christmas holiday).

10-year note: Currently net long 50.2k, up 22.8k.

Once again last week, bond bears (on price) were rejected just under one percent. Last Wednesday’s intraday high of 0.97 percent was one of several unsuccessful attempts since June to rally the 10-year yield past one percent. Rates have not been over that threshold since March. The closest was on the 4th this month when these notes yielded 0.99 percent before reversing lower.

On a weekly, rates are extended. Early August, the 10-year only yielded 0.5 percent. Plus, the Fed remains an active buyer of treasury securities, which helps exert downward pressure on these yields. The bears do have one thing going for them, which is technicals. Since the August low in particular and even going back to March, the 10-year has made higher lows. The ascending triangle pattern can eventually result in a breakout.

Should things evolve this way, more interesting would be the Fed’s reaction function. It has already guided to monthly purchases of at least $120 billion in US treasury bonds and mortgage-backed securities. In a highly leveraged economy – be it federal, corporate, or household – higher rates can begin to bite a lot quicker. With the balance sheet already $7.4 trillion, the central bank will have a juggling act in hand.

30-year bond: Currently net short 170.4k, down 46k.

Major economic releases for the remainder of the week are as follows. Happy New Year!

The S&P Case-Shiller home price index (October) is published later this morning. Nationally, US home prices jumped seven percent year-over-year in September. This was the fastest y/y pace since May 2014. Price appreciation has accelerated since bottoming at 3.1 percent in August last year.

WTI crude oil: Currently net long 551.9k, up 959.

The intraday high of $49.43 six sessions ago stands. In the next three sessions after that high, WTI ($47.62/barrel) successfully tested the 20-day moving average but is also struggling to save the 10-day. There is short-term straight-line support at $46.

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This blog 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 security or ...

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