ab13 February 2024Global Research and Evidence LabGlobal StrategyCTAs' Positioning and Flows - Biweekly UpdateDetails on the methodology/model can be found in our Q-Series reportPausing again in equities but still actively selling bonds & buying energy• CTAs have re-engaged in stocks buying in February, providing support and counterbalancing the latest backup in UST yields. They added another $15-20bln worth of global stocks, pushing their overall exposure to its 87%ile of a 30+yr distribution. Recent inflows should prove temporary with CTAs likely pausing again.• In rates, CTAs continued to reduce their duration risk in the last two weeks, selling around $10/15mln Dv01 in aggregate. Interestingly, flows were quite mixed with CTAs selling EU and US duration but buying a bit of Asian duration. Our model expects the outflows to intensify in the next two weeks (selling $25/30mln Dv01) and become more homogenous across regions.• In credit, no change, CTAs are max long the asset class.• In FX, CTAs' inflows into the USD did not fade in February. They bought another $50/60bln MTD (mostly against G10 currencies) which comes on top of the $70/80bln done in January. As a result, CTAs have switched from net short to net long USD in the middle of last week. Flows should moderate significantly from here but not reverse.• In commodities, CTAs continued to buy oil and are now net long the cohort. We expect CTAs flows to remain positive for oil, neutral for agriculturals and negative for metals.Current signals: bullish stocks, credit, neutral bonds and US$, bullish oila) Equities: bullish Japan, EU and US, neutral UK and EM ex Asia, bearish Asiab) Bonds: bullish Asia, neutral EU, bearish US and Canadac) Credit: bullish across the boardd) Currencies: bullish LatAm FX and GBP, neutral $, bearish JPY and Asia FX (excl. INR)e) Commodities: bullish Cotton, Cattle Feeder and Live Cattle, bearish LME Lead, Copper, Soybean Meal and ZincPotential trades in couple of chartsLevels to watch on S&P 500Levels to watch on UST 10yWhat our CTA model says about FX? What our CTA model says about Equities?What our CTA model says about Rates? What our CTA model says about Credit?What our CTA model says about Commodities?Figure 1: CTA price momentum signals in major markets: today vs forecast-1.00-0.75-0.50-0.250.000.250.500.751.00US10YEU10YSPXSX5EMESA(EM Eq)XIN9IEURMXNCNHCdxHYCrudeGoldSignal (t)Exp. Signal (t+2w)Signal value [-1,+1]Source: UBS, BloombergFigure 2: Current positions and expected flows (as % of ADV) in major markets-15-10-5051015US10YEU10YSPXSX5EMESA(EM Eq)XIN9IEURMXNCNHCdxHYCrudeGoldPosition (t, %ADV)Expected Flows (t, t+2w, %ADV)(%ADV)XIN9I: -22% ADVCDX HY: +33% ADVSource: UBS, BloombergThis report has been prepared by UBS Europe SE. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES, including information on the Quantitative Research Review published by UBS, begin on...
