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MAY 22, 2023

LOW ACTIVITY

The cryptocurrency market is currently experiencing a period of low activity, with Bitcoin being the most affected. Despite concerns about the stability of the U.S. regional banks and the ongoing debt ceiling negotiations, the price range of Bitcoin has been narrow for several days, similar to the low trading experienced earlier this year and in 2020. In addition, Ethereum has also experienced a record-low options-based volatility. These tight trading ranges can be attributed to conflicting market influences, with some investors taking optimistic positions while others remain cautious.

U.S DEBT CEILING

President Joe Biden and House Speaker Kevin McCarthy are scheduled to continue debt ceiling negotiations later today. Although both sides hope to reach an agreement soon, negotiations have been tense as Republicans refuse to raise the debt limit without a plan for future spending cuts. Treasury Secretary Janet Yellen has expressed concerns about the consequences if the debt ceiling is not increased, and highlighted that if a solution is not found soon, difficult choices will have to be made regarding which bills to pay and which bills may not be paid.

FED UNCERTAIN ON INTEREST RATES

Minneapolis Federal Reserve President, Neel Kashkari, expressed uncertainty on whether to raise interest rates or pause to observe inflation developments. The Federal Reserve’s benchmark funds rate is set between 5%-5.25%, and the “dot plot,” which features the governors’ future rate expectations, will be updated at the June meeting. Kashkari suggests a possible pause in June to gather more information, however, if inflation does not decrease, Kashkari would be in favor of raising rates again. Although, with the most uncertain time in understanding the underlying inflationary dynamics, Kashkari is worried about the most prominent factors driving rates to increase.

PACWEST SELLS LOAN PORTFOLIO

PacWest Bancorp has recently agreed to sell a $2.6 billion portfolio of 74 real estate construction loans to Kennedy-Wilson Holdings Inc, as part of its strategy to strengthen its liquidity. Kennedy-Wilson will purchase the loans at a discounted price of $2.4 billion, assuming all future obligations of approximately $2.7 billion. Additionally, the bank has also stated that it plans to sell six additional loans to Kennedy-Wilson for $363 million, but this deal is still subject to approvals. Following these announcements, PacWest Bancorp’s shares experienced noticeable gains.

KEY EVENTS HAPPENING THIS WEEK

Monday: U.S. debt ceiling talks.

Tuesday: S&P flash U.S. services and manufacturing PMI reports for May.

Wednesday: Fed Governor Christopher Waller speaks about the economic outlook.

Thursday: Initial jobless claim weekly report and Pending home sales report for April.

Friday: PCE index report for April and final Consumer sentiment report for May.

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