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. 13 Jul 2022).
Today's market report is available for download at:
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Investment Disclaimer:
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I am not a registered investment, legal, or tax adviser or a broker/dealer, and all opinions expressed by me are from my research for educational purposes only.
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Past performance presented here is not an indicator of future performance.
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This post expresses my own opinion about the financial market. It is not an offer to buy or sell, or a solicitation of any offer to buy or sell any security mentioned in this post.
Fixed Income and Money Market
June Consumer Price Index, CPI came in hot yesterday, with headline inflation standing at 9% on an unadjusted 12-month basis while core inflation (excluding food and energy prices) stabilized at 5.9% on an unadjusted 12-month basis.
Following the release of June hot inflation figures, the short-end rates of the U.S. Treasury par yield curve rose by double-digit basis points, inverting the yield curve even further. As a result, the benchmark 10-year - 2-year bond spread (calculated as 10-year par rate minus 2-year par rate) fell by a whopping 15 bps, the biggest drop since the year 2000 on fears of more aggressive rate hikes in the near term.
(1 basis point, bp = 0.01%)
Investment-grade bond ETF made a 0.75% gain yesterday, both supported by the falling of long-tenor treasury par yields and a recessionary outlook which led to flight-to-quality behavior, from risky equity assets to less risky fixed income assets and from risky high-yield corporate bonds to stable and quality investment-grade bonds.
Commodities
Crude oil futures rose slightly in yesterday’s trading session while natural gas futures rebound sharply due to worsening Russia-Ukraine conflicts which led Russia to shut the Nord Stream pipeline for 10-day repairs, U.S. production estimates which showed a production decline and an expected higher demand for cooling due to warmer weather forecasts.
Equities
It’s a shitshow on the equity side, with all key factor ETFs dropping to levels that are lower than last week’s close and all sectors except home construction are in the red as compared to a week earlier.
Crypto
While all TradFi (traditional finance) asset classes were disappointing, Bitcoin made a 4.13% comeback. Despite its one-day gain, Bitcoin’s downside risks remain significant.
According to Investopedia, Value-at-Risk is defined as:
A statistic that quantifies the extent of possible financial losses within a firm, portfolio, or position over a specific time frame. This metric is most commonly used by investment and commercial banks to determine the extent and probabilities of potential losses in their institutional portfolios.
Based on the 30-day 95% historical Value-at-Risk (VaR) profile of Bitcoin above, Bitcoin’s downside risk has been increasing.
Although Bitcoin’s large drawdown risk decreased slightly based on observed historical data, with a decreasing negative skew (i.e. lesser probability of making losses than gains) and a lower kurtosis number (i.e. lower risk of large draw-down), its large drawdown risk remained significant.
Bitcoin hash rate slumps to lowest in over five months amid 100-degree-plus weather in Texas. On the other hand, crypto lender Celsius filed for Chapter 11 bankruptcy and seeks to bring in new directors to restructure its business.
That’s what you need to know for today’s market updates. Please like, share and follow.
Reference:
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Thumbnail image here was downloaded from Unsplash, where credit is given to Jeremy Bezanger, the creator of this photo.
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https://www.nytimes.com/2022/07/11/business/germany-russia-nordstream-shutdown.html
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https://forkast.news/headlines/bitcoin-hashrate-low-five-months-texas-heat/
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https://beincrypto.com/celsius-files-chapter-11-bankruptcy-brings-new-directors/
