This week we highlight the 5-Year Notes CMR COT Chart as it shows the most crowded positioning in Fixed Income. Over the last seven weeks, Large Speculators have increased their net-short position to an extremely crowded level, not seen in a long time as evident by the second long-term chart going back to 2009. The basis trade which is an arbitrage play used by hedge funds to profit from the very small price difference between cash Notes and Treasuries futures may have impacted positioning, but at this point that is already represented in the chart and current positioning does show max crowded levels for Large Speculators. Small Speculators continue to be net-long the 5-Years making it difficult to have a clear entry for this trade, since ideally, a trader would want both Speculator types on the same side of the trade to fade.
Final thoughts on Fixed Income overall, this market has basically become socialized since 2009, so making comparisons to historical norms seems an exercise in futility. We hear how the yield curve has never been inverted for this long. Well, never before has the market been dominated by the Federal Reserve owning these securities. This is yield curve control being done by the people who basically control the money supply. You can hate it, you can disagree with it, and you can see what a problem this could be in the future, but as a trader you have to respect it.
Hope you enjoyed today’s post. If you are interested in learning more about the Crowded Market Report and the services we provide, which includes more in depth analysis of all major markets including Equities, Currencies, Crypto, Fixed Income, Precious Metals, Industrial Metals, Softs, Grains and more, please visit www.crowdedmarketreport.com.
Thanks,
Jason Shapiro & The CMR Team
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hello jason! thank you once again for your analysis. one question i would like to ask you in regards to the fed‘s role in the markets. is the fed also active in the futures market and are fed holdings included in these charts?