Commitment Of Traders: Futures And Hedge Fund Positions, Sunday Feb. 7

Following futures positions of non-commercials are as of February 2, 2021.

10-year note: Currently net long 58.7k, up 21.8k.

So far so good from bond bears’ perspective (from price point of view). After having failed just under one percent for nine months, the 10-year treasury yield reclaimed that level on January 6. This was then followed by a rally to 1.19 percent by the 12th and a successful breakout retest on the 27th. From that low, rates gradually rallied to culminate in a test on Friday of last month’s high before closing the long-legged doji session at 1.17 percent.

It is also important to point out that the one-percent breakout also formed part of an ascending triangle. A takeout of 1.19 percent will be one more step toward 1.40 percent where resistance is decent. Should things evolve this way, comes the question, how would the Fed react to this development?

In fact, as soon as the 10-year broke out of one percent, several Fed officials, including Chair Jerome Powell and Vice Chair Richard Clarida, tried to jawbone the bond market saying they would continue to aggressively purchase these bonds – amounting to $120 billion/month in mortgage-backed securities and treasury notes and bonds.

Granted that in the land of interest rates it is not always the level rather the pace of change, owing to the existence of excessive leverage in the system – be it federal, corporate or household – rates rising to 1.40 percent, or toward two percent for that matter, will begin to bite through higher interest payments regardless it happens within a few months, six months or a year.

30-year bond: Currently net short 214.4k, up 16.9k.

Major economic releases for next week are as follows.

The NFIB Optimism Index (January) and JOLTs (December) are due out Tuesday.

Small-business job openings declined two points month-over-month in December to 32. Last May, the sub-index was down to 23. Between December 2018 and July 2019, the metric hit 39 three times – a record.

In November, non-farm job openings fell 105,000 m/m to 6.53 million. Openings were down to five million last April, before recovering. They peaked in January 2019 at 7.52 million.

The consumer price index (January) is scheduled for Wednesday. CPI and core CPI respectively rose 0.4 percent and 0.1 percent m/m in December. In the 12 months to December, they increased 1.4 percent and 1.6 percent, in that order.

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