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FEBRUARY 15, 2024

SOL BOOM

Solana tokens have seen a 15% increase in the past two weeks and are performing well compared to other major tokens. Data indicates that leveraged bullish bets make up a majority of futures open interest for SOL, but this could result in a long squeeze event. The bets on futures tracking SOL have reached a peak of $1.7 billion, with a significant increase since the start of February. However, the high level of leverage can lead to increased market volatility, potentially causing a long squeeze. Despite this, SOL’s open interest accounts for less than 5% of its market capitalization, suggesting that futures volatility may not have a lasting impact on the spot price.

RETURN DOWNTURN

The retail sales in the U.S. took a sharp downward turn in January, falling by 0.8%, which was much higher than the anticipated 0.2% decrease. This decline was a significant shift from the unexpected 0.6% increase in December, later revised to 0.4%. A closer look at the categories reveals that nine out of 13 reported declines, with noticeable decreases in building materials, garden equipment, and miscellaneous store retailers. Conversely, sales at furniture and home stores saw a substantial increase of 1.5%. These developments are raising concerns among investors, who are closely monitoring the situation for signs of a gradual slowdown in the U.S. economy, aiming to temper inflation to match the 2% target set by the Federal Reserve. Moreover, the current consumption trends could potentially influence economic growth in the first quarter, potentially assuaging concerns about inflation for Federal Reserve officials.

SHRINKING CLAIMS

During the week ending February 10, initial jobless claims declined by 8,000 to 212,000, below the forecast, while the four-week moving average increased to 218,500. Continuing claims were higher than expected at 1.895 million, compared to the prior week’s 1.865 million. The seasonally adjusted insured unemployment rate increased from 1.2% to 1.3% from the previous week. The Department of Labor reported that the actual number of initial claims under state programs, on an unadjusted basis, decreased by 12,565 to 222,164 for the week ending on February 10, whereas seasonal factors anticipated a decrease of 3,523 from the previous week. These figures indicate a positive trend in jobless claims, but the increase in trend of the four-week moving average and insured unemployment rate may point to a potential shift in employment trends.

SURGING DEMAND

Despite New York Community Bancorp’s exposure to real estate-related risks and its recent decisions to cut dividends while increasing provisions for loan losses, investors are showing an insatiable demand for blue-chip bonds in the US. This surge in demand is driven by bond investors, who are leveraging the elevated yields of new debt prior to a potential pivot by the Federal Reserve towards interest rate cuts. This display of resilience from bond investors contrasts with the unease of regulators and the stock market. High-grade corporate bonds are becoming a hot commodity, as evident from the significant demand and issuing at a record-setting pace. Big banks have dominated much of the rise in blue-chip debt sales, comprising around 55% of the overall offerings this year. Despite concerns about the regional banking sector, clients might be finding comfort in the stability of the banking system as a whole. Analysts predict that this momentum will persist, particularly as interest rates rise back above 4% on the 10-year treasury bond. Despite potential headwinds, US bank bonds seem prepared for any obstacles this year, as they are closely monitored, stress-tested, and subject to regulatory requirements that ensure their capital cushions remain robust.

INTERNATIONAL NEWS

After two consecutive quarters of economic shrinkage, Japan’s economy unexpectedly slipped into a recession, primarily due to sluggish domestic demand. The country’s gross domestic product (GDP) declined at an annualized rate of 0.4% in the final three months of last year, following a 3.3% drop in the previous quarter. This has raised concerns about the future of Japan’s negative interest rate policy, which has been in place since 2007. The recession was driven by reduced spending from households and businesses, as well as rising living costs, and while there has been growth in exports, questions have arisen about the sustainability of Japan’s dependency on external demand as a key driver of economic growth. As a result, concerns have emerged about Japan’s economy slipping to the fourth-largest in the world, trailing behind Germany in terms of dollar value. Moreover, with the uncertainty surrounding the Bank of Japan’s plans to possibly end its negative interest rate policy, paired with concerns about the dependence on external demand, the future prospects of Japan’s economic recovery remain uncertain. Additionally, Japan’s reliance on key trading partners experiencing slow economic growth poses a challenge for the country’s economic outlook in the coming years.

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