Weekly COT Report: Market Positioning Hints at Lower Yields
Matt Simpson November 8, 2021 12:42 AM
Whilst net exposure to US 10-year treasury notes were at their most bearish level since the Pandemic began, CFTC data shows it is a function of longs covering.
Read our guide on how to interpret the weekly COT report
As of Tuesday 2nd November 2021:
- Traders trimmed USD long exposure by -0.4 billion, according to calculations by IMM. Traders are estimated to be net-long the US dollar by 19.3 billion
- Large speculators increased net-short exposure to JPY and CHF futures for a 4th and 3rd week, respectively.
- Traders were their most bullish on NZD futures since March.
- Net-short exposure to US 10-year Treasury note fell to its most bearish level since March 2020.
Traders were their most bearish on the US 10-Year note since March 2020
With traders positioned at their most bearish level since the pandemic was taking hold on global markets (March 2020), the initial assumption would be for higher yields as they move inversely with bond prices. Yet the bearish positioning was seen with a strong reduction of gross longs, whilst newly initiated shorts only rose gradually. And as bond prices rallied on Friday (to send yields lower) we now suspect that longs are returning to the table, so we could expect lower yields going forward. And that could weigh on the US dollar.
Traders were their most bullish on NZD futures since March 2021
Net-long exposure to NZD futures rose to its highest level in 7-month last week. And that probably shouldn’t come as too much of a surprise, given traders are now expecting a 50 bs hike at RBNZ’s next meeting. However, as of yet there are no obvious signs of a sentiment extreme. Prices have yet to track higher with the net-long index and there’s some headroom for net-long and gross long exposure to move to previous highs.
As of Tuesday 2nd November 2021:
- Large speculators increased net-long exposure to gold futures to their highest level since early September.
- Traders were their most bullish on platinum futures in 5-months.
- Net-log exposure to copper futures were trimmed for a second consecutive week.
- Traders trimmed net-long exposure to silver by -4.4k contracts.
Traders increased net-long exposure to gold
Traders marginally increased net-long exposure to gold futures by a mere 569 contracts. For comparison, we can easily see weekly changes of around 20-30k contracts, so this really is a minor adjustment. Price action suggests the potential for a bullish breakout, yet the net-long index has also risen to a historical resistance level – yet that is not at a historical extreme. As shorts have been closing out recently our bias is tilted towards a bullish breakout.
How to trade with City Index
You can trade easily trade with City Index by using these four easy steps:
Open an account, or log in if you’re already a customer
• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
- Search for the company you want to trade in our award-winning platform
- Choose your position and size, and your stop and limit levels
- Place the trade
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.