Peek Into Future Through Futures; How Hedge Funds Are Positioned

Following futures positions of non-commercials are as of November 26, 2019 (data was published Monday instead of last Friday due to Thanksgiving holiday).

10-year noteCurrently net short 145.7k, down 37.8k.

 

In the last nine weeks, the Federal Reserve’s SOMA (System Open Market Account) holdings increased from $3.55 trillion to $3.65 trillion, up $96.6 billion. This preceded a $688-billion reduction from the April 2017 high of $4.24 trillion. Pre-financial crisis, these holdings were sub-$500 billion, meaning even after the two-and-a-half-year decline, the Fed holds a massive arsenal of Treasury and mortgage-backed securities.

This is noteworthy particularly because the bank has been unable – or unwilling – to significantly cut its balance sheet during a time when the economy is in expansion. There will be a downturn.  It is just a matter of when, not if, which also suggests the balance sheet’s path of least resistance, in the long run, is up.

For whatever it is worth, the latest bottom in SOMA holdings took place in the week ended September 25.  Stocks bottomed early October.

30-year bondCurrently net short 71.4k, up 23.7k.

 

Major economic releases for the remainder of this week are as follows.

Wednesday brings the ISM non-manufacturing index (November). Services activity in October increased 2.1 points month-over-month to 54.7.

Revised durable goods data (October) are due out Thursday. Preliminarily, orders for non-defense capital goods ex-aircraft – proxy for business capex plans – fell 0.8 percent year-over-year to a seasonally adjusted annual rate of $69.4 billion. This was the fourth y/y decline in a row.

The employment report (November) and the University of Michigan’s consumer sentiment index (December, preliminary) are scheduled for Friday.

October produced 128,000 non-farm jobs – a five-month low – for a monthly average this year of 167,000, versus a monthly average last year of 223,000 jobs.

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