In today's daily market updates, we are going to look at what happened in the fixed income, money market, commodities and U.S. equity markets yesterday (i.e. 07 Jul 2022).
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Fixed Income and Money Market
Federal Open Markets Committee (FOMC) yesterday released a series of hawkish minutes as what has expected by all market participants. A 75 bps rate hike has been priced in by the market and the Fed has committed to proceed with a 50 bps - 75 bps rate hike in July despite warnings from some that this would escalate the risk of recessionary-driven recession. (Note: 1 basis point, bp = 0.01%)
U.S. Treasury par yield curve steepened slightly following the confirmation of the hawkish stance by the FOMC. The intermediate-term benchmark interest rates (2-year par rate) increased 15bps yesterday, 5 bps more than the long-term 10-year benchmark interest rates.
As a result, the yield curve was inverted yesterday with the 10-year - 2-year bond spread (calculated as 10-year par rate minus 2-year par rate) falling into the negative territory for the first time after its recovery in April 2022. This has undoubtedly escalated the recessionary fears as yield inversion is conventionally treated as a predictor of recession.
Crude oil futures have fallen across all maturities as the fear of economic recession has outweighed the supply constraints. Furthermore, after the Norway government’s intervention in its recent offshore oil and gas workers’ strike, the offshore oil production workers have now resumed work and would recover the crude supplies which have previously lost during the strike shortly after. The increased supplies have erased all previous gains in crude oil futures.
Natural gas futures on the other hand rose slightly by 0.13% to 1.25% across all maturities as warmer weather is forecasted to increase the demand for it in air-conditioning.
S&P 500 Market Index ETF (NYSEARCA: SPY) rose by 0.34% upon the release of Fed minutes yesterday, driven by the rise in technology sectors in which the ETF components are heavily tilted.
Bitcoin was the best performing asset yesterday, with a 1.87% gain as other markets dipped. Nevertheless, its downside risk has increased, with an increasingly negative skew (i.e. greater probability of making losses than gains) and an increasingly greater kurtosis number (i.e. greater risk of large draw-down).
According to bitcoinist.com,
BITI (ProShares Short Bitcoin Strategy ETF), popularly known as the first short bitcoin ETF in the U.S. has been making waves since its launch. Only a little over a week old, the ETF has garnered the favor of institutional investors who have flocked to take advantage of it. As of early this week, BITI’s holdings have climbed to a total of 3,811 BTC.
However, it still pales in comparison to the ProShares BITO, a long BTC ETF. This shows that although interest is growing in short bitcoin ETFs, the majority of investors still prefer to be long for the long term.
Crypto News Yesterday:
Voyager Digital (TSE:VOYG) has filed for Chapter 11 bankruptcy after one of its largest borrowers, Three Arrows Capital (3AC) defaulted on its $ 657M loan. Crypto lenders such as Voyager boomed in the COVID-19 pandemic, drawing depositors with high interest rates and easy access to loans rarely offered by traditional banks. The recent slump in crypto markets has hurt lenders. Voyager said it had more than $110 million of cash and owned crypto assets on hand.
2. Inverse Bitcoin ETF Sees 300% Increase In Short Interest (by bitcoinist.com)
The ProShares BITI ETF, popularly known as the first short bitcoin ETF in the United States has been making waves since its launch. Only a little over a week old, the ETF has garnered the favor of institutional investors who have flocked to take advantage of it. As of early this week, BITI’s holdings have climbed to a total of 3,811 BTC.
However, it still pales in comparison to the ProShares BITO, a long BTC ETF. This shows that although interest is growing in short bitcoin ETFs, the majority of investors still prefer to be long.
In November 2021, the total number of daily active Bitcoin addresses stood at over 1 million. According to the weekly on-chain analysis report published by Glassnode, the number now stands at around 870,000 per day, which is down by almost 13% in the last seven months.
While the overall BTC exchange balance recently touched its lowest level in approximately 48 months, whales moved their Bitcoin assets to crypto exchanges during the last month to take advantage of the bearish opportunities in the market.
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