Commitment Of Traders: What Hedge Funds Are Buying

Following futures positions of non-commercials are as of September 1, 2020.

10-year note: Currently net short 13.5k, up 85.8k.

The 10-year Treasury yield (0.72 percent) remains rangebound between 0.57 percent and 0.74 percent. There was some excitement among bond bears (on price) last week when on both Thursday and Friday rates were brushing against the top end of the nearly-six-month rectangle. But then, bulls took control right from the word go this week as yields came under pressure.

By Thursday, the 10-year yield was down to 0.61 percent, slightly breaching the 50-day moving average (0.63 percent). Then came August’s slightly-better-than-expected jobs report, which helped push the yield back above the average on Friday. In the end, the 10-year only lost a basis point for the week.

Once again, bears are eyeing the top end of the range. Non-commercials, in the meantime, switched to net short 10-year note futures this week. This is the first time in 11 weeks they are net short. They have been vacillating a lot of late, but right here and now they expect a range resolution to the upside. Fingers crossed!

30-year bond: Currently net short 164.8k, up 28k.

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

The NFIB optimism index (August) is due out Tuesday. Small-business optimism fell 1.8 points month-over-month in July to 98.8. Job openings dropped two points m/m to 30; the sub-index is down from 38 in February but up from 23 in May.

Non-farm job openings (JOLTS, July) will be published Wednesday. Openings rose 518,000 m/m in June to 5.9 million. Earlier, they fell from seven million in February to five million in April.

Thursday brings the producer price index (August). Producer prices fell 0.1 percent m/m in July and rose 1.9 percent in the 12 months to July. Core PPI over the same time period was unchanged and up 1.9 percent, in that order.

The consumer price index (August) is on tap for Friday. In July, consumer prices rose 0.6 percent m/m and one percent year-over-year. Over the same time period, core CPI increased 0.6 percent and 1.6 percent, respectively.

WTI crude oil: Currently net long 572.8k, down 6.5k.

The EIA report for the week of August 28 was soft across the board, which probably owes it to Hurricane Laura. US crude production dropped 1.1 million barrels per day to 9.7 mb/d; this was the lowest since January 2018. Crude imports were down one mb/d to 4.9 mb/d. Stocks of crude, gasoline and distillates shrank by 9.4 million barrels, 4.3 million barrels and 1.7 million barrels to 498.4 million barrels, 234.9 million barrels and 177.5 million barrels, in that order. Refinery utilization tumbled 5.3 percentage points to 76.7 percent.

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