CoT; Futures Positions This Week

Following futures positions of non-commercials are as of April 23, 2019.

10-year noteCurrently net short 323.8k, up 48.1k.

After getting rejected at 2.61 percent Wednesday last week, the 10-year Treasury yield (2.51 percent) went after that level again this week.  Both Monday and Tuesday, it retreated after touching 2.59 percent, which was just above the 50-day moving average.  Support-turned-resistance at 2.62 percent is a crucial level going back a decade.

Bond bears can take consolation in the fact that shorter-term moving averages have turned up, although yields closed out the week below both.  The 10-year bottomed late March at 2.36 percent.  Non-commercials are betting the uptrend continues.  They have added to their net shorts in 10-year note futures the past five weeks.  But unless 2.62 percent is decisively recaptured, their aggression just might contribute toward a squeeze at some point in the future, causing rates to go lower.  Friday, the long end of the curve totally ignored the 3.2-percent print in 1Q19 real GDP; the 10-year shed three basis points.

30-year bondCurrently net short 40k, up 15.5k.

Major economic releases next week are as follows.

Personal income for March is due out Monday.  In the 12 months to January, core PCE – the Fed’s favorite measure of consumer inflation – increased 1.8 percent.  This was the slowest pace since February last year.

The employment cost index (1Q) and the S&P Case-Shiller home price index (February) are scheduled for Tuesday.

Private-sector compensation costs in 4Q18 increased three percent from a year ago.  Wages and salaries rose 3.1 percent and benefits 2.6 percent.

Nationally, US home prices rose 4.3 percent year-over-year in January.  This is a healthy pace, although prices in March last year were rising at a 6.5-percent clip.

Also Tuesday, a two-day FOMC meeting begins.  Markets expect rates to be left unchanged.  The Fed has already said there would be no hikes this year.  The last hike was last December.  More importantly, it will be interesting to hear the FOMC’s take on the recent uptick in the effective fed funds rate, which is just a few basis points from the top of the target range of 225 and 250 basis points.

Wednesday brings the ISM manufacturing index for April.  March was up 1.1 points month-over-month to 55.3.  Last August’s 60.8 was the highest since May 2004.

Productivity (1Q) and durable goods (March, final) are on tap Thursday.

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