Roundup on #crypto2023 and #macro

✅ 2023 > 2022 on liquidity
✅ 5% terminal rate
✅ China de-risk for global econ
🤔 War de-escalates
🤔 Q1 earnings, recession?

Crypto
✅ Similar to 2015 cycle
✅ Deleveraged
🚩@DCGco GBTC
🚩Imminent regulation
🤔 #ETH vs #BTC

I’m long here🐂

Dovish turn at the Fed with supply-demand imbalances🌍
Taking it all together, geopolitical concerns, signs of a dovish turn at the Fed, and expectations of a slowing consumer have fully emboldened the 'peak rate' narrative. While front-end yields might be capped along that line of thinking, longer-end yields will likely continue to fluctuate given supply-demand imbalance, with Treasury funding needs spiking against the backdrop of QT and stubborn inflation pressures.
#Geopolitical #FederalReserve #PeakRate #Yields #macro

Crypto markets see stability☕
Unfortunately, the excitement in macro asset classes has not translated to crypto, with BTC and ETH prices stuck in familiar ranges over the past 1.5 months, though with BTC outperforming ETH handily as Ethereum gas fees and network stats continue to soften. Outside of majors, other well known altcoins sold off by around 7% on investor indifference as daily active addresses on DeFi continued to fall, with Optimism and Avalanche seeing a 30% MoM drop over the past month.
One area that has seen a macro pass-through is in DeFi lending yields, which has been rising steadily throughout the year as higher fiat rates have slowly permeated through to crypto via the growth in RWAs.
#BTC #ETH #Altcoins #macro #DeFi

Bond rallies persist while interest rate hikes may be postponed👀
However, the higher yield move would not be sustained. A continued short-squeeze in global fixed income saw a 15bp rally in UK bonds and decently well received auctions in the UK and Germany. Furthermore, dovish comments from Fed Governor Waller noted that they are "finally getting very good inflation [data]", and that the Fed is now in a position to "watch and see" on rate hikes. Following up on his dovish WSJ piece from Tuesday, Timiraos tweeted Waller's statement to suggest that the current rate move is similar to the pre-SVB yield run-off, and doing much of the financial conditions tightening work for the Fed already.
#macro #YieldMove #ShortSqueeze #FinancialConditions #WSJ

Challenges in Crypto: Funding and Legal Issues🧐
Finally, the space is further plagued by WSJ reports that Islamic militant groups such as as Hamas, PIJ, and Hezbollah have been funding their operations with crypto, raising over $140m of funds during the past 2 years. The obvious negative optics of this and the ongoing FTX/SBF trials have certainly not helped sentiment, and perhaps it might take a dovish Fed to turn our fortunes around in the near term if the USD gets sold.
#funding #militantGroups #trials #sentiment #macro

The CPI release led to unexpected fixed income activity📉
While the magnitude of the beat was not particularly shocking, but the wave of fixed income and risk short-squeeze this week had setup relatively lop-sided positioning heading into the number. Although equity markets held strong for much of the morning session, US treasuries clearly traded on their backfoot all-day in preparation for the 30yr auction.
Bond markets already went into the 1pm supply with a massive 13bp concession post-CPI, but a terrible auction crushed whatever risk-buying support we had left in the day. The 30yr issue tailed +3.7bp for the largest tail in 2 years, with a feeble 2.35x bid-to-cover (weakest since march) and user-demand dumping to just 81.8% for the weakest showing since Dec 2021. Bonds sold off further into the close as the yield-curve spiked between 9-16bp higher across the curve in a bear steepening manner, with the risk-off sentiment spilling over to FX (DXY +0.7%) and equities (SPX -1%).
#treasury #bondmarket #auction #marketvolatility #macro

Fixed Income Markets Rallies as NFP Signals No More Hikes🌍
Fixed income received the 'all-clear' to rally with reckless abandon post NFP, with rates cratering 15bp in the front-end without looking back, and <1yr rates dropping by ~20bp (nearly a full cut) over the past week. Markets are now pricing effectively no more hikes for the rest of the cycle, and the first cut back to be in the Mar-Jun 2024 period. Consensus expectations are for the Fed to achieve a soft-landing with waning economic activity and ever so softening pricing pressures.
#NFP #FixedIncome #PricingPressures #FedSoftLanding #macro

SPX equity breadth has sharply declined, and expectations for future market volatility have intensified☕
The correlated weakening of bonds + equities has led to a terrible performance of common 'risk parity' strategies in September so far, worsening the risk-off tone and leading to significant forced-selling pressures. SPX equity breadth has collapsed materially with just ~40% of stocks trading above it's 200d moving average, with the synchronized weakening in equities, bond prices, credit CDS, and EM FX helping to reiterate the 'cash is king' mantra for 2023. Furthermore, unlike in the crypto space, cross-asset volatilities have started to rise again, with jumps in equity VIX and rate vol being the most obvious as we have rebounded to the pre-summer highs.
Looking ahead, expect price action to be exceptionally choppy as short-term oversold conditions are balanced against a tricky quarter-end and the ongoing UAW strikes and government shutdown shenanigans. October likely won't see much reprieve early on, so we will continue to adopt a cautious/net bearish approach to our own risk management in the meantime.
#bonds #SPX #VIX #governmentshutdown #macro

Crypto sector experiences reduced fundraising⚠️
Unsurprisingly, the pressure on private capital has spilled over to crypto, where the industry saw the lowest amount of fund raising since late 2020. Furthermore, valuation and exit concerns have returned to the forefront, with ~90% of fund raised deals being in Seed stage or earlier, with projects predominantly based out of the US despite the regulatory headwinds.
#PrivateCapital #Crypto #ExitConcerns #SeedStage #macro

September's NFP shows a robust 336k payroll rise📈
Friday's NFP release saw payrolls increase by 336k in September, nearly 2x stronger than expectations for the largest monthly increase since January. Prior revisions were revised up to 227k (+40k) for August, and 236k (+79k) for July, painting a strong labour picture all around. The service sector led the way with a 234k jump in jobs, followed by leisure and hospitality with a 96k gain, and education and health with a 70k jump. Offsetting the strong gains was a 7-month high in unemployment rates at 3.8%, and softer average hourly earnings growth at 0.2% (vs 0.4% in July). Finally, the labour force also further increased by 90k after August's 736k surge, as employees, with participation rate steady at 62.8%, as workers have started to repopulate the workforce as economic conditions slowdown.
#NFP #UnemploymentRate #LaborForce #EconomicConditions #macro

US PPI rises above consensus, triggering market reactions🤝
US PPI jumped 0.5% in September with a 0.3% bump in core, both above consensus expectations but a small amount. The YOY rate jumped to 2.7% for the highest print since April, with pressures coming from good prices which jumped 0.9%, energy prices jumping 3.3%, and food prices also showing 0.9% gains. Markets saw knee-jerk selling in both fixed income and equities on the print, sending the treasury yield curve 2.5bp flatter and SPX down -0.3% for its highs.
#macro #EnergyPrices #FoodPrices #TreasuryYield #EquityReactions

Has Powell Shifted to A Dovish Stance?🤝
Treasury bonds continued their struggle for another day, as weakness across global fixed income and decent US economic data (Initial Claims -13k to 198k, lowest since January) pushed 10y bonds above 5% and 30y above 5.10% in the early session. However, markets definitely saw some short-covering and tactical buying of duration heading into Powell's speech, with expectations leaning towards a dovish pivot in-line with the rest of the FOMC members.
However, Chairman Powell's prepared statement and discussion didn't appear to carry too much substance and was relatively neutral, choosing to stick very close to home and towards the data-dependent / wait-and-see narrative. On one hand, he noted that "short-term measures of core inflation over 3 and 6 months are running below 3%, and "indicators of wage growth show a gradual decline towards levels that would be consistent with 2% inflation over time", which were obviously taken as dovish. On the hawkish side, he noted that persistently above trend growth and a lack of easing in the tight labour market "could put further progress on inflation at risk and could warrant further tightening". Furthermore, he dropped a line that he is not aware of any fundamental changes in how monetary policy is currently affecting the economy, and that "it may be that rates haven't been high enough for long enough". Lastly, what Powell did not do was to push back on the idea that the November meeting is 'dead' in terms of a possible rate hike, pretty much cementing expectations that the Fed will stay put for November as geopolitical tensions continue to playout.
#macro #FOMC #USEconomicData #DovishExpectations #RateHike

Bond Market Reacts to Rate Decisions and Strong Data🤔
On the rates side, while Thursday provided nearly the same backdrop as Wednesday's sell-off (ECB hawkish-hold vs BoC hawkisk hold, strong GDP print vs German IFO and new home sales beats), rate markets decided to react in exactly the opposite direction because... markets exist to create the maximum pain for traders, most of the time. Off-side positioning and a short-covering squeeze likely contributed to the bond rally, with yields falling around 10bp in the belly and reversing the majority of yesterday's moves.
The ECB meeting left a hawkish impression for the most part, with President Lagarde acknowledging that long term interest rates have risen "markedly", but added no further push back that the governing council was unhappy with the move. On the US side, a decently received 7yr auction (no tail) saw a strong 2.7x bid-to-cover, the strongest since March 2020, with only 11% left to dealers and well below average and helping bond yields close back at the day's lows.
#BondMarke #Auction #YieldChanges #macro #bondyield

So, weaker US retail sales data has got investors on edge, right? They're eyeing their recent positions and thinking: 'Could this push the Fed to slash rates earlier?' 🤔 📈 #macro #CryptocurrencyPotential #BTC #Ethereum(ETH) #DASH

Geopolitical Tensions Worsen, Markets Being Affected🔴
Markets saw another classic move yesterday, starting with worsening geopolitical headlines on potential oil embargoes and sanctions, as a number of countries have cancelled their planned reception of President Biden as the tension in the region continues to escalate.
US treasuries traded heavy all morning in anticipation of the 20yr auction, fresh from the scars of last week's poor auctions which spiked yields higher across the curve. Upside beats in UK CPI hurt had already hurt European fixed income in the early session, before strong US housing building permits data (965k, 8th consecutive gain in a row) took 30y year yields to above 5% again.
#geopolitical #tension #USTreasuries #CPI #macro

Yields and S&P futures fluctuated dramatically📈
Yields spiked initially with 30yr rates touching the highest levels since 2007 shortly after the data release, with yields jumping +16bp on the initial pop with SPX futures dropping by -1.3%. However, just as risk assets were looking for another rough session, sentiment flipped on a dime by the late NY morning as yields staged a 14bp peak to trough turnaround, and S&P staging a >3-sigma intraday move with an astonishing +2.8% recovery. The USD index broke a 12-week winning streak, implied volatility fell, gasoline and industrial commodities eased to the weakest levels in a month, and Nov Fed hiking odds remained steady at just over 20% despite the solid NFP release. All-in-all, a relatively strong 'goldilocks' squeeze to close out the week.
#30yrRates #SPXFutures #USDIndex #Commodities #macro

Voice From Authority Supports Bond Price👍
Just as fixed income were staring at the abyss again, a flurry of tweets from Bill Ackman and Bill Gross (OG Bond King) abruptly put a floor on bond prices, as they explicitly turned supportive (or at least no longer bearish) on fixed income, citing an incoming economic slowdown and recession as early as Q4.
#macro #BillAckman #FixedIncome #Recession #Q4

Upcoming earnings and data releases this week⚠️
Looking ahead, the market's focus next week shall be on earnings, with BoA and GS the two heavy weights that will be reporting on Tuesday, followed by MS, Tesla, Netflix, on Wednesday, TSMC on Thursday, and AMEX on Friday. On the data side, we'll have inflation data from the UK and EU, and US retail sales towards the end of the week. Finally, Powell will be speaking to the Economic Club of New York on Thursday just ahead of the FOMC's media blackout, offering the perfect forum for the Chairman to either acknowledge or push back against the Committee's recent dovish turn. Good luck and good trading into a busy week ahead!
#macro #DataRelease #Powell #EconomicClub #FOMC

Dimon of JPM highlights global financial concerns👀
"The may be the most dangerous time the world has seen in decades."
  - Jamie Dimon, Friday October 13, 2023
We began the Friday NY session with the above premonition from JPM's Jamie Dimon despite reporting an earnings beat, as the veteran CEO pointed to:
1.dwindling consumer cash buffers
2.persistently tight labour markets
3.elevated inflation pressures extreme levels of govt debt
4.largest peacetime fiscal deficits
5.unknown long-term impacts of QT
6.supply-chain impacts from geopolitical tension
as a long-list of reasons of why he believes that the world is heading into choppy waters in the foreseeable future.
Markets ended the week in the same manner we began, worrying about the kinetic conflicts between Israel and Hamas, which has had little impact on asset prices so far, but is certainly in danger of taking a turn for the worse on escalating urban warfare. Gold surged by 3.5% on Friday with a corresponding spike in vol to 5 month highs, oil spiked by 6%, treasury yields fell by ~6bp, and US stocks closed around 0.5-1% weaker despite a promising start to the earnings season.
#JPM #GeopoliticalTension #macro #Israel #Hamas

Rate hike expectations diminish🤝
Despite the stronger labour and price data, rates traders have pretty much taken out all rate hikes for the rest of the year, with November hike odds at just 8% and December odds at under 25%. Furthermore, U-Mich consumer sentiment plunged -5.1 points to 63 in October, significantly worse than expected registering the largest decline in over 15 months. Current conditions fell to 66.7 vs 71.4 last month, while the 1yr and long-term inflation expectations echoed the bounce in CPI to trade at 4 month highs (3.8% and 3.0% respectively).
#RateHike #ConsumerSentiment #CurrentConditions #InflationExpectations #macro