Peeking Into The Future Thru Futures, What Hedge Funds Were Buying This Week

Following futures positions of non-commercials are as of March 30, 2021.

10-year note: Currently net short 89.8k, up 102.1k.

Minutes for the March 16-17 FOMC meeting will be out next Wednesday. Not much extra color is expected out of these minutes.

In the meeting, the fed funds rate was left between zero and 25 basis points; also left unchanged was the asset buying program at $120 billion/month. Rather unexpectedly, members did let markets know their expectations not to raise rates through 2023. They concurrently raised real GDP growth forecast to 6.5 percent this year, up from 4.2 percent last December; core PCE inflation forecast went from 1.8 percent to 2.2 percent.

Markets would love some clarity on this. If the economy grows anything remotely close to the consensus, it is set to surpass its pre-pandemic high. Yet here we have benchmark rates at zero bound. The long end of the treasury yield curve acts confused.

The Fed is aggressively buying treasury notes and bonds, with holdings of $4.21 trillion, up from $2.03 trillion in March last year, but the 10-year has gone from 0.40 percent to 1.68 percent, with a high of 1.77 percent on Tuesday. (Post-March jobs report Friday, the 10-year rallied to 1.72 percent.) These rates are begging the short end to come around and head higher.

30-year bond: Currently net short 114.4k, down 13.3k.

Major economic releases for next week are as follows.

The ISM non-manufacturing index (March) and durable orders (February, final) are scheduled for Monday.

Services activity in February declined 3.4 points month-over-month to 55.3. Last April, post-pandemic, activity slumped to 41.6.

February’s preliminary data showed orders for non-defense capital goods ex-aircraft – proxy for business capex plans – increased 9.1 percent year-over-year to a seasonally adjusted annual rate of $72.5 billion. January’s $73 billion was a new record.

JOLTs job openings (February) are due out Tuesday. Non-farm openings rose 165,000 m/m in January to 6.92 million. Openings were down to 4.63 million last April.

Friday brings the producer price index (March). Producer prices rose 0.5 percent m/m in February; stripping out food and energy, prices were up 0.2 percent. In the 12 months to February, headline and core prices rose 2.8 percent and 2.5 percent respectively.

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