UBS: CTA Flows Switching From Negative To Positive For Both Stocks And Bonds?

UBS note the following:

• “Last week of August saw CTAs carry on with the reduction of equity exposure, selling around $20-25bln worth of global stocks. September could prove to be the exact opposite. Last year's "post Jackson-Hole" selloff should soon fall out of the 1yr rolling window, providing "technical" incentive for CTAs to buy stocks in the coming weeks.”
• “In credit, CTAs remain max long. The probability of unwinding is lower than two weeks ago, courtesy of the recent tightening. For CTAs to start buying (back) credit protections, IG need to be above 80bps and HY above 460/470.”
• “Since Q421, CTAs have consistently been short duration. But like in equities, the rolling window effect should be a positive for bonds in September/October. Our model shows significant skew in the potential flow distribution, with any rally greater than 20bps matched with sizeable buying flows (> $80mln DV01).”
• “In FX, CTAs have continuously bought the USD since the end of July. In the last two weeks, they mostly sold G10 FX, especially the EUR and CAD (their prime targets in August). Our model anticipates the recent dollar buying to gently start reversing. CTAs will likely begin by covering their shorts in Asian FX (AUD, JPY, INR, CNH).”
• “CTAs bought all 4 commodities groups in the last two weeks. Energy & Metals should continue to benefit from CTAs' buying pressures, when agriculturals could face some selling flows.”