Looking Into The Future Thru Futures, What Hedge Funds Bought This Week

Following futures positions of non-commercials are as of April 6, 2021.

10-year note: Currently net long 84.6k, up 174.4k.

On March 17, the 10-year treasury yield broke out of 1.63 percent, subsequently rallying to 1.77 percent by the 30th. Rates then came under pressure, with Thursday closing right at 1.63 percent and Friday rising three basis points to 1.67 percent. So far so good. Bond bears (on price) have defended the breakout retest.

But it is too soon to say rates are done going down. The weekly in particular remains way overbought. The 10-year has come a long way, having bottomed at 0.4 percent in March last year.

Structurally, the 10-year acts healthy, with several breakouts this year, having broken out of one percent early this year, 1.2 percent mid-February and 1.4 percent toward the end of that month.

A test of 1.4 percent is probable at some point, which by default suggests a breach of 1.63 percent in due course.

30-year bond: Currently net short 118.5k, up 4.1k.

Major economic releases for next week are as follows.

The NFIB Optimism Index (March) and the consumer price index (March) come out on Tuesday.

Small-business optimism inched up eight-tenths of a point month-over-month in February to 95.8. Post-pandemic, the index posted a low of 90.9 last April.

In February, core CPI decelerated to growth of 1.28 percent year-over-year, edging up 0.1 percent m/m. The headline CPI increased 0.4 percent m/m and 1.68 percent y/y.

Thursday brings retail sales (March), industrial production (March), the NAHB Housing Market Index (April) and Treasury International Capital data (February).

Retail sales in February dropped three percent from January’s seasonally adjusted annual rate of $579.1 billion, which was a record.

Capacity utilization declined 2.3 percent m/m in February to 73.8 percent. January’s 75.5 percent was an 11-month high.

March homebuilder confidence declined two points m/m to 82. Last November, confidence hit a record 90, having tripled from last April’s 30.

In the 12 months to January, foreigners purchased $374.6 billion in US equities – a record. This represents quite a U-turn from April 2019 when they sold $214.6 billion worth – also a record.

Housing starts (March) and the University of Michigan’s consumer sentiment index (April, preliminary) are scheduled for Friday.

Starts tumbled 10.3 percent m/m in February to 1.42 million units (SAAR). Last December, starts hit 1.67 million units, which was the highest since September 2006. Last April, starts tumbled to 934,000, which was the lowest since February 2015.

Consumer sentiment in March jumped 8.1 points m/m to 84.9 – a 12-month high. Pre-pandemic, sentiment hit 101 in February last year.

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