Latest Commitment Of Traders, Future Positions Of Non-Commercials

Following futures positions of non-commercials are as of June 22, 2021.

10-year note: Currently net short 2.3k, up 36.6k.

Doves have won – for now.

In the wake of a slightly hawkish tilt in last week’s FOMC meeting in which members brought forward their projections for interest rate hikes into 2023, with 11 of them penciling in at least two quarter-point increases that year, repercussions were felt across assets. The immediate post-meeting reaction was to sell stocks, sell bonds, buy the dollar and sell gold, among others.

As this week opened, both doves and hawks got to work.

Fed Chair Jerome Powell and John Williams, president of the New York Fed which has a permanent voting seat, argue that it was too soon to dial back the ongoing monetary stimulus. Presidents Robert Kaplan, James Bullard and Raphael Bostic – Texas, St. Louis and Atlanta districts respectively – argue that the time to pare back the bond-buying program is growing closer. Bostic sees a rate liftoff next year.

The fed funds rate is currently zero-bound, even as the Fed spends up to $120 billion a month in bond purchases – $80 billion in treasury notes and bonds and $40 billion in mortgage-backed securities. The balance sheet has grown from $4.2 trillion in early March last year to $8.1 trillion as of Wednesday this week.

Stocks are hooked on this monetary morphine. The way bulls see it, there is no end to this – at least not now. Of the three hawks above, Bostic is a voting member this year, but will not vote next year. Bullard becomes a voting member next year and Kaplan the year after. This week, both the S&P 500 and Nasdaq 100 rallied north of two percent to fresh highs. The Fed put is well entrenched (more on this here).

This round goes to the doves.

30-year bond: Currently net short 60.4k, up 3.7k.

Major economic releases for next week are as follows.

On Tuesday, the S&P Case-Shiller Home Price Index (April) comes out. Nationally, US home prices in March jumped 13.2 percent year-over-year. This was the fastest pace of y/y appreciation since December 2005. The median price of both new and existing homes posted new records in May (chart here).

The ISM manufacturing index (June) will be published on Wednesday. Manufacturing activity rose 0.5 points month-over-month in June to 61.2. The index has remained above 60 for four months in a row – and in five of the last six months.

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Disclaimer: This article 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 ...

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