Commitment Of Traders, Futures And Hedge Fund Positions - Sunday Jan. 17

Following futures positions of non-commercials are as of January 12, 2021.

10-year note: Currently net short 50.2k, up 77.9k.

No sooner than the 10-year treasury yield rallied past one percent than several Fed officials, including Chair Jerome Powell on Thursday, were out in force trying to put the lid on budding tapering talk. Also on Thursday, president-elect Joe Biden announced a $1.9-trillion Covid relief plan.

Post-positive vaccine news from Pfizer (PFE) and Moderna (MRNA) – on November 9 and 16 respectively – investor optimism surrounding the US economy this year has firmed up; equities took another leg higher and bond prices fell.

With all that said, the 10-year (1.1 percent) yields barely north of one percent. As recently as August 2019, rates were north of two percent. Despite this, the fact that the Fed already felt it necessary to interject and declare that they will continue to purchase these securities shows how brittle things are. The Fed is currently buying $120 billion/month in mortgage-backed securities and treasury notes and bonds.

Given the leverage in the system – be it federal, corporate and household – the economy is not in a position to handle a sustained rise in interest rates. The Fed currently holds $2.03 trillion in MBSs and $4.02 trillion in treasury notes and bonds, up from $1.37 trillion and $2.03 trillion 10 months ago (last March). They are headed a lot higher.

30-year bond: Currently net short 196.4k, up 8.9k.

Major economic releases for next week are as follows. Markets are closed Monday for observance of Martin Luther King, Jr. Day.

Treasury International Capital data (November) will be out Tuesday. In the 12 months to October, foreigners purchased $262.8 billion in US stocks – a record.

The NAHB Housing Market Index (January) is scheduled for Wednesday. Homebuilder confidence fell four points in December from November’s record 90. Post-Covid, confidence collapsed to 30 in April.

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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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