Funds further added to record emerging market positions last week according to cross asset flows data analyzed by Bank of America Merrill Lynch’s global market analysis team.

According to Commitments of Traders data from the Commodity Futures Trading Commission, managed money brought $3 billion of WTI crude last week and sold $0.5 billion of silver. Gold and copper positions were mostly kept stable.

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Leveraged funds brought $4 billion of S&P 500 futures, $0.8 billion of JPYUSD and $0.5 billion of EURUSD, but sold Treasuries across the board. Meanwhile, asset managers bought $1.8 billion of 2-year Treasury, $1.6 billion of EM and $0.9 billion of JPYUSD futures, while selling $0.7 billion of 10-year Treasury last week.

BoA 4

Hedge funds add to record EM longs

Emerging markets once again attracted the attention of institutional money across the board. Asset managers increased long positions in the MSCI emerging market index futures by $1.6 billion to $17.4 billion last week. Using data going back to October 2009, this long position is now the largest on record. Leveraged funds increased their longs on the MSCI emerging market index futures by $0.4 billion to $5.1 billion also an all-time net high.

Exposure to MSCI EAFE Index futures (designed to represent the performance of large and mid-cap securities across 21 developed markets) stands at an all-time high of $8.3 billion with $0.3 billion of exposure to the index added last week (data goes back to 2008). Leveraged funds maintained long exposure to the index’s futures at $1.3 billion with capacity to add further exposure.

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Net notional exposure for US Treasuries, which is calculated as face value, was $3.7 billion net long for 30-year Treasury bonds at the end of last week, leveraged funds sold $0.9 billion and flipped to a net short of -$0.5 billion. Asset managers increased their short on the 10-year by $0.7 billion to -$19.7 billion and leveraged funds increased their short on the 10-year by $0.3 billion to -$2.3 billion. With the 2-year Treasury notes, asset managers increased longs by $1.8 billion to $28.8 billion and leveraged funds decreased longs by -$1.3 billion to $8.5 billion.

Emerging Markets Could Rally Another 20% But….

Other notable positions of interest according to Bank of America’s analysis of positioning data include:

  • Net positioning as a percentage of open interest was above two standard deviations in emerging markets and Russell 2000 stocks.
  • The asset manager long position in EURUSD increased by $0.4 billion to $4.1 billion near a three-year high. On the flip side, leveraged funds decreased their short against the euro by $0.5 billion to -$13.9 billion.
  • Asset managers maintained net short of -$5.5 billion of GBPUSD while leveraged funds increased their short on sterling by $0.4 billion to -$5.9 billion.
  • Managed money exposure remained near a three-year high in silver.
  • Equity long short hedge funds decreased exposure from 50% to 40% net long
  • Macro hedge funds brought USD exposure to the highest since mid-February.