Commitment Of Traders: The Speculative Treasury Bubble Pops As Dollar Longs Continue Rising

Today's CFTC Commitment of Trader data confirms that the dollar strengthening trend from last week continues: net spec commercial positions in the USD are now well off their lows from three weeks ago and are up to 5,850, after hitting a 2010 low of -1,580. At the same time, both JPY and EUR spec positions declined (by -2,727 and -6,243 positions, respectively) as the rotation into the dollar, as brief as it may end up being, accelerated. Whether this was merely momentum chasing or an expectation of a less efficient QE2 can be answered by looking at select commodity positions. A quick glance at wheat, soybeans, coffee, corn and oats shows that pretty much all 5 representative commodities saw their net long spec positions increase again. So QE2 is definitely going to manifest itself in more inflation, or so at least claim the speculators. Yet not is as it seems: a look at Treasury specs shows a combined drop across the 2, 5 and 10Y space of 123,835 contracts to 186,892, only the second largest drop in 2010, which occurred after the cumulative total hit a 2010 record of 310,727 the week prior! In other words, even as specs were discounting an increase in inflation and a potential increase in the value of the dollar, the bond bubble officially popped.

Treasury Net Specs:

Commodity Net Specs:

FX Net Specs:

And, as usual, a full CFTC COT report, courtesy of Libanman Futures - link