Today, we saw ISM Manufacturing data at 46.7, well below the 49.5 estimates. This shows that there is lower demand from both domestic and foreign markets for U.S. goods.

 The second data point out today was JOLT’s (Job Openings). This came in at 9.553 million, another upside surprise in this metric. Many economists (along with ourselves) were expecting this to be the forward-looking data point that may indicate a more material weakening in the labour market that just hasn’t come. We have had two major upside surprises in this metric. The consensus for the number today was 9.2M, far less than the 9.553M that came in. 

On Friday, we have the Non-Farm Payrolls and the Unemployment Rate out. These are data points that we need to watch as they may be market-moving if there is a significant upside/downside surprise. 

Bonds: The quarterly refunding announcement

This morning (Wednesday, 01/11/23), the US Treasury announced its Quarterly Refunding. The Quarterly Refunding is the US Treasury announcing its plans to issue new debt, how much they’ll issue and at what duration they’ll issue it. 

The bond market was watching this closely, and therefore, every other market was as well to see how bonds reacted to the announcement. Ultimately, the US Treasury announced that it would increase its planned sales of debt, but the increases were less than what most major dealers expected. 

So, debt issuance is increasing, but with less supply than expected. Therefore, the markets rallied and bidded the US 10Y and US 30Y bonds (yields lower), as this is where the issuance was increased but by less than expected. Less supply (than expected) coming to market is, of course, bullish. 

Now, welcome in… Powell and the Fed 

This evening (Wednesday 01/11/23), the Federal Reserve maintained the Interest Rate in the US at 5.25% to 5.50%. Powell suggested that the FED are not yet confident that they’re meaningfully restrictive with their current Interest Rate, along with the fact that they may raise in December, but “they have not yet discussed December’s meeting”. 

So, despite some hawkish tone from Powell during the Press Conference, the markets have taken the message as “we’re done” - no more rate hikes. During the Press Conference, Powell was given the opportunity to address a rate hike in December, but he seemed to steer away from directly answering. This was taken bullishly by the markets.

Of course, there are huge risks to this, in that if inflation moves more meaningfully higher and the Fed does have to do more - this is probably unlikely - the markets would react very negatively to this.

However, so far, markets have reacted very positively to Powell and seem to be running with the message that the Fed is done. The S&P is up 1.16% on the day, with the Nasdaq up 1.7%. S&P 1D Chart

What’s all this got to do with BTC?

Well, a significant bid coming into the Bond market is bullish for risk assets as it means the markets are becoming more comfortable and are, therefore, willing to add some risk. 

However, Bitcoin hasn’t really moved following the moves in TradeFi (Equities and Bonds) markets. It’s really key for us to continue tracking the way BTC trades; does it trade in correlation to risk assets or safe havens (GOLD)?

But, what the above and today have told us is that if the economic data holds up, risk assets can perform well in the coming weeks, which SHOULD be positive for Bitcoin. 

As always, thanks for reading.

Cryptonary, OUT!