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SignalPlus Morning Briefing 26 Jun 2023

SignalPlus

Democratizing Options for Digital Assets

发布日期: 2023年6月26日

TradFi markets came under-pressure into the weekend as traders sold risk into illiquid summer Friday liquidity, with the S&P 500 selling off -0.8% with every single sub-sector in the red. The index saw its worst weekly close since March (-1.4%), though it’s coming off an incredible string of 5 consecutive weekly gains?that was due for a pull-back sooner rather than later. Data-wise, manufacturing PMI data was disappointing in both the US and especially in Europe, and BoE’s 50bp hike on Thursday provided a stark reminder of the inflation headwind that Europe is still wrestling with.

While the widely expected treasury TGA liquidity drain has been very orderly thus far, thanks to judicious use of RRP (reverse repos) to rebuild cash balances instead of outright liquidity drains. The treasury’s current cash balance stands at $292bln, well within Wall Street forecasts, coming at the cost of an approximately 50/50 split between RRP and reserve balances. Furthermore, the Fed’s discount window lending and BTFP usage has been remarkably consistent since the March spike, signaling no undue liquidity needs from regional banks’ balance sheets.

Interestingly,?Secretary Yellen was quoted in an interview stating that the increases in interest rates and recent banking stability are likely to lead to more bank mergers in the 2nd half of this year, as weaker institutions struggle with the rising costs of retaining deposits, thus lower profitability. While the US regional banking crisis seems to be a distant memory away, it would be interesting to see whether the Yellen’s predictions come to fruition, as that would imply imminent earnings disappointments to come out of financial stocks as early as this quarter.

With the 1st half of the year coming to a close, and the looming summer lull in activities to be upon us,?global DM yield curves have quietly re-inverted back close to their historical lows, albeit with much less fanfare and premonitions of impending recessions as feared previously. While bond and equity investors might be currently caught in the classic glass half-full vs half-empty analogy,?what is consistent is their expectation of a goldilocks outcome, where the Fed has inflation fully under control and any potential recession to be harmlessly shallow. Furthermore, continued innovations in AI is meant to foster an era of productivity growth unlike anything we have seen before.

Famous last words, perhaps, but a forceful catalyst will likely be required in order to change investors’ status-quo opinion in the foreseeable future.

In crypto,?the bull sentiment continues with BTC holding its gains >$30k and leading the way higher, though the weekend has also seen an explosive catch-up rally with a number of blue-chip DeFi tokens(AAVE +25%, SNX +16%, Uniswap +11% and CRV +8%). With secondary liquidity still thin compared to recent years, and longer term ‘HODLers’ unlikely to be willing sellers even at these levels, we wouldn’t be surprised to the current rally sustain itself longer than many might expect, as the recent TradFi filing of spot ETF interests appear too coordinated to be a pure coincidence. Good luck!

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