Economic News

USD Index COT Data from the commitments of traders report

USD Index COT Data from the commitments of traders report

US bond yields have continued to rise in an almost parabolic fashion, with 1 year note now just shy of 4%, and the 2-year at 3.8% with an increasingly inverted yield curve. And large speculators are not shy in capitalizing on these lower bond prices- which move inversely to bond yields. Last week they were net-short the 2 year treasury note by-358k contracts, which is their most bearish position since April 2021.

The net-short exposure over time it could be argued it is approaching a sentiment extreme.
Net-short exposure hasn’t ever spent much below -350k.
It’s 3-year Z-score is -2.3 standard deviations.
It’s 1-year SD is 2.9
There are 4.6 bears for every bull.

But to try and pick a top in yields with some banks now forecasting the Fed to raise rates to 5% next years, it would take a brave trader to try and fight this trend. But what we can see is that traders seem confident that yields could rise further, even at a potential sentiment extreme.

Traders reduced net-short exposure to silver at their fastest weekly pace in 6-months
Large speculators decreased net-long exposure to gold for a fifth consecutive week
Managed funds were net-short for a second consecutive week

Commodities were broadly under pressure from the US dollar last week, silver posted a 2% gain. And it appears partly down to short-covering alongside an increase of bullish interest. Large speculators closed -6.5k contracts and 1.7k long contracts were opened. This saw net-short exposure rise at its fastes weekly pace in 6-months. Managed funds also added 4.5k long contracts and closed -11.9k short contracts. So we’ll watch silver prices to see if it can break back above $20 before reverting to bullish bias.