Bonds

Archive for Bonds – Page 14

COT Bonds Speculators raised their 10-Year Treasuries bearish bets to 6-week high

Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC).

The latest COT data is updated through Tuesday February 22nd and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets.

Highlighting the COT bonds data was the large increase in bearish bets for the 10-Year Bonds. The speculative bearish position in the 10-Year jumped this week by -111,029 contracts and marked the largest one-week rise in bearish positions since November 2nd, a span of sixteen weeks. This decline in sentiment has pushed the overall 10-Year spec positioning to the most bearish level of the past six weeks. Most of the bonds markets we cover saw an increase in their bearish bets this week as the Federal Reserve central bank is widely expected to raise their benchmark interest rate in March.

Joining the 10-Year (-111,029 contracts) with speculator weakness this week were the Eurodollar (-89,630 contracts), 2-Year Bond (-4,201 contracts), Fed Funds (-49,473 contracts), 5-Year Bond (-155,821 contracts) and the Ultra US Bond (-4,242 contracts). The Ultra 10-Year (9,672 contracts) and Long US Bond (10,107 contracts) saw small improvement in their speculator contracts this week.

Data Snapshot of Bond Market Traders | Columns Legend

Feb-22-2022	OI	OI-Index	Spec-Net	Spec-Index	Com-Net	COM-Index	Smalls-Net	Smalls-Index
Eurodollar	11,350,313	52	-2,382,867	0	2,830,166	100	-447,299	6
FedFunds	2,062,168	76	-26,952	36	41,655	65	-14,703	25
2-Year	2,163,983	15	-119,959	58	218,056	68	-98,097	1
Long T-Bond	1,223,515	53	-14,738	88	43,269	34	-28,531	30
10-Year	4,083,463	70	-285,092	28	543,178	90	-258,086	19
5-Year	4,295,789	63	-347,236	19	483,375	77	-136,139	44

3-Month Eurodollars Futures:

The 3-Month Eurodollars large speculator standing this week was a net position of -2,382,867 contracts in the data reported through Tuesday. This was a weekly lowering of -89,630 contracts from the previous week which had a total of -2,293,237 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.0 percent. The commercials are Bullish-Extreme with a score of 100.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 6.0 percent.

3-Month Eurodollars Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	4.7	74.1	4.6
– Percent of Open Interest Shorts:	25.7	49.1	8.5
– Net Position:	-2,382,867	2,830,166	-447,299
– Gross Longs:	536,990	8,405,647	522,154
– Gross Shorts:	2,919,857	5,575,481	969,453
– Long to Short Ratio:	0.2 to 1	1.5 to 1	0.5 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	0.0	100.0	6.0
– Strength Index Reading (3 Year Range):	Bearish-Extreme	Bullish-Extreme	Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-12.2	12.9	-13.5

30-Day Federal Funds Futures:

The 30-Day Federal Funds large speculator standing this week was a net position of -26,952 contracts in the data reported through Tuesday. This was a weekly decline of -49,473 contracts from the previous week which had a total of 22,521 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 36.3 percent. The commercials are Bullish with a score of 64.9 percent and the small traders (not shown in chart) are Bearish with a score of 25.2 percent.

30-Day Federal Funds Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	7.8	75.1	2.5
– Percent of Open Interest Shorts:	9.1	73.1	3.2
– Net Position:	-26,952	41,655	-14,703
– Gross Longs:	161,357	1,549,551	50,750
– Gross Shorts:	188,309	1,507,896	65,453
– Long to Short Ratio:	0.9 to 1	1.0 to 1	0.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	36.3	64.9	25.2
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	5.0	-3.4	-29.9

2-Year Treasury Note Futures:

The 2-Year Treasury Note large speculator standing this week was a net position of -119,959 contracts in the data reported through Tuesday. This was a weekly reduction of -4,201 contracts from the previous week which had a total of -115,758 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 58.0 percent. The commercials are Bullish with a score of 67.5 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 1.5 percent.

2-Year Treasury Note Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	12.1	76.5	7.0
– Percent of Open Interest Shorts:	17.6	66.4	11.5
– Net Position:	-119,959	218,056	-98,097
– Gross Longs:	261,710	1,655,912	150,668
– Gross Shorts:	381,669	1,437,856	248,765
– Long to Short Ratio:	0.7 to 1	1.2 to 1	0.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	58.0	67.5	1.5
– Strength Index Reading (3 Year Range):	Bullish	Bullish	Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-34.7	44.2	-13.4

5-Year Treasury Note Futures:

The 5-Year Treasury Note large speculator standing this week was a net position of -347,236 contracts in the data reported through Tuesday. This was a weekly decrease of -155,821 contracts from the previous week which had a total of -191,415 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 19.3 percent. The commercials are Bullish with a score of 76.9 percent and the small traders (not shown in chart) are Bearish with a score of 43.6 percent.

5-Year Treasury Note Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	7.3	78.2	9.5
– Percent of Open Interest Shorts:	15.4	67.0	12.7
– Net Position:	-347,236	483,375	-136,139
– Gross Longs:	314,612	3,360,252	409,662
– Gross Shorts:	661,848	2,876,877	545,801
– Long to Short Ratio:	0.5 to 1	1.2 to 1	0.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	19.3	76.9	43.6
– Strength Index Reading (3 Year Range):	Bearish-Extreme	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-8.7	-10.0	34.1

10-Year Treasury Note Futures:

The 10-Year Treasury Note large speculator standing this week was a net position of -285,092 contracts in the data reported through Tuesday. This was a weekly decrease of -111,029 contracts from the previous week which had a total of -174,063 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 28.1 percent. The commercials are Bullish-Extreme with a score of 89.8 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 18.6 percent.

10-Year Treasury Note Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	10.6	74.3	9.4
– Percent of Open Interest Shorts:	17.6	61.0	15.8
– Net Position:	-285,092	543,178	-258,086
– Gross Longs:	432,764	3,034,786	385,175
– Gross Shorts:	717,856	2,491,608	643,261
– Long to Short Ratio:	0.6 to 1	1.2 to 1	0.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	28.1	89.8	18.6
– Strength Index Reading (3 Year Range):	Bearish	Bullish-Extreme	Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	9.1	-7.3	0.2

Ultra 10-Year Notes Futures:

The Ultra 10-Year Notes large speculator standing this week was a net position of 23,543 contracts in the data reported through Tuesday. This was a weekly boost of 9,672 contracts from the previous week which had a total of 13,871 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 34.0 percent. The commercials are Bullish with a score of 75.9 percent and the small traders (not shown in chart) are Bearish with a score of 33.3 percent.

Ultra 10-Year Notes Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	15.5	71.3	9.6
– Percent of Open Interest Shorts:	13.9	63.6	18.9
– Net Position:	23,543	112,921	-136,464
– Gross Longs:	226,775	1,045,206	140,723
– Gross Shorts:	203,232	932,285	277,187
– Long to Short Ratio:	1.1 to 1	1.1 to 1	0.5 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	34.0	75.9	33.3
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-18.7	5.8	29.9

US Treasury Bonds Futures:

The US Treasury Bonds large speculator standing this week was a net position of -14,738 contracts in the data reported through Tuesday. This was a weekly lift of 10,107 contracts from the previous week which had a total of -24,845 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 88.1 percent. The commercials are Bearish with a score of 33.9 percent and the small traders (not shown in chart) are Bearish with a score of 29.9 percent.

US Treasury Bonds Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	10.6	72.9	14.2
– Percent of Open Interest Shorts:	11.9	69.4	16.6
– Net Position:	-14,738	43,269	-28,531
– Gross Longs:	130,266	891,876	174,017
– Gross Shorts:	145,004	848,607	202,548
– Long to Short Ratio:	0.9 to 1	1.1 to 1	0.9 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	88.1	33.9	29.9
– Strength Index Reading (3 Year Range):	Bullish-Extreme	Bearish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	18.1	-8.4	-19.0

Ultra US Treasury Bonds Futures:

The Ultra US Treasury Bonds large speculator standing this week was a net position of -334,381 contracts in the data reported through Tuesday. This was a weekly lowering of -4,242 contracts from the previous week which had a total of -330,139 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 48.8 percent. The commercials are Bullish with a score of 60.7 percent and the small traders (not shown in chart) are Bullish with a score of 54.6 percent.

Ultra US Treasury Bonds Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	6.0	79.7	11.9
– Percent of Open Interest Shorts:	30.8	57.6	9.2
– Net Position:	-334,381	297,783	36,598
– Gross Longs:	80,638	1,072,855	159,934
– Gross Shorts:	415,019	775,072	123,336
– Long to Short Ratio:	0.2 to 1	1.4 to 1	1.3 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	48.8	60.7	54.6
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-10.1	1.4	15.8

Article By InvestMacro – Receive our weekly COT Reports by Email

*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets.

The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.

21 Feb

Why the “60 / 40 Balance” May Be Hazardous to Your Portfolio

Notice the similar pattern between these two bond charts

By Elliott Wave International

Financial advisors have long advocated a mix of 60% stocks / 40% bonds to cushion portfolios from downturns in the stock market.

The thinking is that stocks go up in the long-term, hence, that’s where investors should allocate the most. At the same time, advisors acknowledge that stock prices can sometimes go down so “less risky” bonds will provide at least some protection.

The problem with this investment strategy is that bonds can go into bear markets too. Moreover, they can do so at the same time as stocks.

Let’s review what happened during the Great Depression of the early 1930s. Here’s a chart and commentary from Robert Prechter’s 2021 Last Chance to Conquer the Crash:

The chart shows what happened to the Dow Jones 40-bond average, which lost 30% of its value in four years. Observe that the collapse of the early 1930s brought these bonds’ prices below — and their interest rates above — where they were in 1920 near the peak in the intense inflation of the ‘Teens.

Now, let’s review more recent history. Here’s another chart and commentary from the book:

This chart shows a comparable data series (the Bond Buyer 20-Bond average) in recent decades. Notice how similar the pattern is to that of 1915-1929. If bonds follow the path that they did in the 1930s, their prices will fall below the 1981 low, and their interest rates will exceed that year’s peak of 16%.

Conventional analysts who expect bonds to move contracyclically to stocks in the months ahead may be in for a very unpleasant surprise.

Indeed, the financial pages are all abuzz about the prospects of higher interest rates or bond yields.

As this Feb. 10 CNBC news item notes:

The yield on the 10-year Treasury note jumped 8 basis points to hit a session high of 2.01%, the first time that the benchmark rate reached the threshold since August 2019.

Elliott Wave International has been preparing subscribers for higher yields for quite some time.

For instance, back in early March 2020, when the yield on the 10-year Treasury note was at a then record low 0.91%, the March 2020 Elliott Wave Financial Forecast, a monthly publication which provides analysis of major U.S. financial markets, said:

This is the first time that 10-year Treasury note yields have dropped below 1%. … Investor ebullience is the only thing that allows for an embrace of no-yield debt. The tidal wave of risk assumption, however, may be turning.

In other words, prepare for higher yields.

Just a few months later, yields hit a bottom and have been trending upward ever since. Mind you, yields had been in a downtrend for some 40 years! Of course, higher yields mean lower bond prices.

All the while, the stock market has been trending lower as well.

Now is the time to know the Elliott wave chart patterns of both bonds and stocks.

If you’re unfamiliar with Elliott wave chart patterns, you are encouraged to read Frost & Prechter’s Wall Street classic, Elliott Wave Principle: Key to Market Behavior.

Here’s a quote from the book:

The Wave Principle is governed by man’s social nature, and since he has such a nature, its expression generates forms. As the forms are repetitive, they have predictive value.

Get detailed insights into these repetitive forms by reading the entire online version of the book for free!

All that’s required for free access is a Club EWI membership, which is also free. If you’re unfamiliar with Club EWI, it’s the world’s largest Elliott wave educational community and offers members free access to a wealth of Elliott wave resources on investing and trading without any obligations.

Become a Club EWI member now by following this link: Elliott Wave Principle: Key to Market Behavior — free and unlimited access.

This article was syndicated by Elliott Wave International and was originally published under the headline Why the “60 / 40 Balance” May Be Hazardous to Your Portfolio. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Bonds Financial News Stock Market News

20 Feb

Does the Fed Really Determine the Trend of Interest Rates?

Here’s what “leads” the effective federal funds rate

By Elliott Wave International

Forbes magazine summed up the Fed’s January statement this way (Jan. 26):

The federal funds rate remains on hold at zero to 0.25% for now, bond purchases should end in March — and then it’s time to raise rates.

The speculation on Wall Street is that the U.S. central bank will raise its federal funds rate by 25 basis points at least twice in 2022. Some Fed watchers expect a bump up as many as four times.

The federal funds rate is the interest rate that banks charge each other to borrow or lend excess reserves overnight and, yes, the central bank sets that rate.

However, what many investors may not realize is that the market leads and the Fed follows. In other words, it’s really the market which determines the trend of interest rates.

The evidence is easily provided. Here’s a chart and commentary from Robert Prechter’s landmark book, The Socionomic Theory of Finance:

No one monitoring the Fed’s decisions can predict when T-bill rates will change, but anyone monitoring the T-bill rate can predict with fair accuracy when the Fed’s rates will change. We demonstrated this ability in August 2007 by predicting that the Fed was about to lower its federal funds rate dramatically.

As you can see, the chart shows when the prediction was made and the aftermath.

Financial history shows other times when the market led, and the Fed followed.

Yet, many Fed watchers point to the early 1980s, when interest rates and inflation had reached historically high levels. The conventional narrative is that then Fed Chairman Paul Volcker decided to strangle the 20% inflation by raising interest rates. In this interpretation, it was the Fed who was proactive. It was the Fed who brought down inflation.

But, the evidence shows that the market was leading and the Fed was following — the whole time.

Here’s another chart, along with commentary, from The Socionomic Theory of Finance:

The chart plots T-bill rates and the effective federal funds rate from 1978 to 1984. T-bill rates peaked four times in 1980-1982. Each of those peaks occurred a month or more before subsequent and reactive peaks in the federal funds rate. The Fed’s rate also lags at bottoms, as depicted on the chart at the lows of 1980, 1981 and 1982-3.

The Socionomic Theory of Finance goes on to say:

That interest rates were in a relentless upward trend during the entire decade of the 1970s and that they have been stuck at zero since 2008 — in both cases despite the Federal Reserve’s contrary desires — is powerful evidence reinforcing the point that the Fed is not in control of interest rates.

So, it’s a myth that the Fed leads the way on the direction of interest rates (and bond yields).

Interest rates (and bond yields) are set by the market and in turn, the market is governed by the repetitive — hence, predictable — patterns of the Elliott Wave Principle.

Get insights into how the Elliott wave model can help you analyze financial markets by reading Frost & Prechter’s Wall Street classic, Elliott Wave Principle: Key to Market Behavior.

Here’s a quote from the book:

Although it is the best forecasting tool in existence, the Wave Principle is not primarily a forecasting tool; it is a detailed description of how markets behave. Nevertheless, that description does impart an immense amount of knowledge about the market’s position within the behavioral continuum and therefore about its probable ensuing path. The primary value of the Wave Principle is that it provides a context for market analysis. This context provides both a basis for disciplined thinking and a perspective on the market’s general position and outlook. At times, its accuracy in identifying, and even anticipating, changes in direction is almost unbelievable.

Here’s the good news: You can read the entire online version for free once you become a Club EWI member.

Club EWI is the world’s largest Elliott wave educational community and is free to join. As a Club EWI member, you’ll enjoy free access to a wealth of Elliott wave resources on investing and trading without any obligations.

Follow this link for free and unlimited access to Elliott Wave Principle: Key to Market Behavior.

This article was syndicated by Elliott Wave International and was originally published under the headline Does the Fed Really Determine the Trend of Interest Rates?. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Bonds Economics & Fundamentals Financial News

19 Feb

Bonds Speculators push their surging bearish bets in Eurodollars to 166-high

Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC).

The latest COT data is updated through Tuesday February 15th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets.

Highlighting the COT bonds data is the continued rise in the Eurodollar bearish bets. The speculative position in the Eurodollar futures has been dropping sharply with higher bearish bets since flipping over from bullish to bearish in May of 2021. The Eurodollar futures are the largest futures market with open interest normally over 10 million contracts each week and are used to make a bet on short-term interest rates (3-month Libor). A decline in Eurodollar futures shows an increase in (deposit) interest rates while an increase in Eurodollar futures shows the opposite. In times of stress (Great Financial Crisis, Covid Crisis), Eurodollar futures have surged higher and in times of normalization, Eurodollar futures usually trend downward. The speculators Eurodollar positioning has been on a downtrend and is currently at the most bearish level of the past one hundred and sixty-six weeks, dating back to December 11th of 2018.

Joining the Eurodollar (-256,945 contracts) in falling this week were the 2-Year Bond (-104,328 contracts), Ultra 10-Year (-30,140 contracts), Fed Funds (-6,129 contracts), 5-Year Bond (-59,036 contracts) and the Ultra US Bond (-14,287 contracts) while increasing bets for the week were seen in the 10-Year Bond (27,847 contracts) and the Long US Bond (8,180 contracts).

Data Snapshot of Bond Market Traders | Columns Legend

Feb-15-2022	OI	OI-Index	Spec-Net	Spec-Index	Com-Net	COM-Index	Smalls-Net	Smalls-Index
Eurodollar	10,998,807	45	-2,293,237	0	2,731,451	100	-438,214	8
FedFunds	1,999,560	72	22,521	42	-3,214	59	-19,307	14
2-Year	2,207,292	17	-115,758	59	184,249	60	-68,491	15
Long T-Bond	1,239,190	56	-24,845	84	42,910	34	-18,065	38
10-Year	4,123,745	73	-174,063	45	436,449	77	-262,386	18
5-Year	4,084,291	52	-191,415	48	418,890	69	-227,475	19