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Macro Newsletter: Optimistic tech news trump bearish macro
Aurelie Barthere
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Key Takeaways
7 min read
  • Future US rate markets now appear closer to economic reality: pricing a terminal rate of ~5.38%, close to the “5 and 3/8th” estimate given by Bullard last week
  • We could see a further uptick in rates after August 2023 (priced as peak rate month currently), followed by a sharp drop at some point in 2024 (as opposed to the gradual rate cuts being priced at the moment)
  • End 2023 - beginning 2024, fiscal policy is likely to turn contractionary in the US, which would advocate for the rate scenario above
  • Crypto prices: their resilience could signify that crypto has priced enough “bad news” and that only a significant shock (recession and risk sell-off) is able to break the current trading range to the downside
  • Base: Coinbase’s presentation of its new testnet chain is exciting in several ways: experimentation of a centralized - decentralized model, and test on roll up technology
  • Japan and JPY: Once in office, we still see a high likelihood of BoJ nominee Ueda leading the exit out of yield curve control

Introduction

“The US economy is stronger than what we previously thought. You certainly see that in the blow up job report” said FOMC voting Committee member Bullard in a CNBC interview last week, summarizing the last flow of US data, and the last move in US rates.

We will not dedicate too much (virtual) ink to detailing what future rate markets have already taken notice of, and will instead extrapolate recent trends in data and policy and their potential implications on asset prices. We will then make a detour via Japan, where the Bank of Japan is experimenting with new restrictions on 10yr JGB short-selling a bit more than a month before Governor Kuroda’s hand over to his successor. We will then leave narratives...