CoT: How Hedge Funds Are Positioned This Week

Following futures positions of non-commercials are as of November 24, 2020 (data published this Monday instead of last Friday due to Thanksgiving holiday).

10-year note: Currently net long 115k, down 37.3k (SPTL).

The 10-year Treasury yield (0.84 percent) has come under pressure since peaking at 0.98 percent on November 9. That was the day Pfizer (PFE) announced its positive vaccine news, which significantly raised investor hopes that the US economy would begin to get back to normal next year. One would think this would put yields under upward pressure. But they retreated from an important spot.

The last time these notes yielded one percent was on March 20 this year. Since then, bond bears (on price) came close to achieving that feat a few times, including 0.96 percent on June 5 and the aforementioned 0.98 percent. Close, but no cigar.

Yields are approaching important support, where these bears can try to regroup. A rising trend line from early August draws to 0.81 percent. Right underneath lies the 50-day moving average at 0.80 percent. If indeed the collective wisdom of markets expects the economy to heat up next year, this support likely gets used as an opportunity to go short.

As of last Tuesday, non-commercials, however, reduced their net shorts in 10-year note futures by 24.5 percent.

30-year bond: Currently net short 201.9k, down 32.5k (TYX).

Major economic releases for the rest of the week are as follows.

Later this morning, the ISM manufacturing index (November) comes out. Manufacturing activity in September rose 3.9 points month-over-month to 59.3, matching the high from September 2018.

Thursday brings the ISM non-manufacturing index. In September, services activity dropped 1.2 points m/m to 56.6 – a five-month low.

Employment data (November), durable goods orders (October, revised) and labor productivity (3Q20, revised) are due out Friday.

Between February and April, non-farm payroll contracted by 22.2 million, to 130.3 million. Between that low and October, 12.1 million jobs were created, meaning there are 10.1 million fewer jobs from the pre-pandemic record high.

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