The Future Thru Commitment Of Traders This Week

Following futures positions of non-commercials are as of August 31, 2021.

10-year note: Currently net short 29.8k, up 143.1k.

Twice in August, the 10-year treasury yield retreated after ticking 1.38 percent. This was just before testing broken-support-turned-resistance at low-1.40s. Back in February last year, this level was breached, and the rates came crashing down until they bottomed at 0.40 percent in March. The rally that followed peaked at 1.77 percent in March this year, preceded by a breakout at one percent in January. In July and August, that level was just about tested as the 10-year (1.32 percent) dropped to 1.13 percent before rallying.

Inability to test the low-1.40s resistance during the most recent run speaks of the struggle bond bears are going through. This is coming at a time when the US economy is firing on all cylinders and inflation is perking up.

Yes, the Federal Reserve continues to spend up to $80 billion a month in purchases of treasury notes and bonds. But at the same time, Chair Jerome Powell indicated at Jackson Hole last week that the central bank is getting ready to taper by the end of the year. Ordinarily – and simplistically – more supply of these securities should result in higher yields. But either these bond traders are not convinced tapering would begin in earnest later this year or they are pricing in serious growth deceleration in the economy.

The Labor Department announced Friday that August produced much-weaker-than-expected 235,000 non-farm jobs, versus expectations of 720,000; July added 1.05 million. In the meantime, home inventory is beginning to rise from very suppressed levels. If this continues, this could help ease off the prevailing rapidly accelerating prices, which in due course could adversely impact consumer sentiment/spending (more on this here).

30-year bond: Currently net short 104.2k, up 4.9k.

Major economic releases for next week are as follows. Markets are closed Monday for observance of Labor Day.

Non-farm job openings (JOLTs, July) are due out on Wednesday. In June, openings jumped 590,000 month-over-month to 10.1 million – a new record.

Friday brings the producer price index (August). In July, producer prices jumped one percent m/m and 7.8 percent year-over-year. At the core level, prices increased one percent m/m in July and 6.2 percent in the 12 months to July.

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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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