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SEPTEMBER 18, 2023

FIRST ETF APPROVED

Europe has made a significant stride in the crypto world with the introduction of its first spot Bitcoin exchange-traded fund (ETF) named as the Jacobi Spot Bitcoin ETF, which will be trading under the symbol BCOIN. This ETF has been developed by Jacobi Asset Management, and is now ready to be listed on Euronext Amsterdam after being in the works for two years. In addition, BCOIN is regulated by the esteemed Guernsey Financial Services Commission, and it stands out due to its strict regulatory compliance and focus on investor protection. Moreover, it is worth noting that this remarkable development  highlights the need for the U.S. to consider its stance on cryptocurrency investment products. Currently, the U.S. Securities and Exchange Commission (SEC) has been cautious in approving Bitcoin ETFs, citing concerns over market manipulation and investor protection. However, the success of the Jacobi Spot Bitcoin ETF in Europe demonstrates that it is possible to establish a regulated, compliant, and investor-friendly ETF for cryptocurrencies.

UPWARD TREND CONTINUES

Oil prices have surged, approaching $95 per barrel, driven by a combination of strong demand and supply cuts by OPEC+ leaders such as Saudi Arabia and Russia. As a result, over the past three weeks, prices have risen by 11%, indicating a potential undersupply in the market. This trend is further supported by the increase in key timespreads and the rising cost of bullish call options. However, the rise in oil prices is also causing concerns about inflationary pressures globally. This is particularly worrisome as central banks, including the U.S. Federal Reserve, are currently evaluating the effectiveness of their interest rate hikes in countering price increases. Moreover, experts anticipate that oil prices may continue to climb and even reach the $100 per barrel milestone. Furthermore, this surge in oil prices has had profound effects on diesel prices, which have surpassed crude oil prices significantly.

IMPACT ON TREASURIES

The Federal Reserve is preparing to release its updated projections for the benchmark interest rate, which could have a significant impact on the U.S. Treasuries market. Despite Chair Jerome Powell downplaying their significance, these projections carry weight due to the lack of clear verbal guidance from Powell and his colleagues. Analysts are particularly interested in the “dot plot” projections, looking for indications of rate hikes in 2023 and the extent of easing expected in 2024. Speculation suggests that the Fed may favor one more rate hike in 2023 while reducing the number of cuts in 2024. If confirmed, this could lead to a sell-off in two-year Treasuries and challenge expectations for a steeper yield curve, causing further recalibration in the overall market. Furthermore, investors are closely monitoring the long-term policy rate estimate, as any changes will reveal valuable insights into future expectations.

MISCONCEPTIONS AROUND DEBT

The U.S.’ national debt has surpassed $32 trillion and is projected to reach $50 trillion in the next decade. However, there are several misconceptions about the severity of the debt problem, and experts clarify that the U.S. does not need to pay off the entire debt immediately, but rather the interest and maturing bonds. In addition, experts highlight that evaluating the debt-to-GDP ratio is crucial, and currently, it stands below the critical threshold. Moreover, experts noted that debt also serves important functions and investments, contrary to the belief that it hampers the economy. Nonetheless, it is worth to highlight that although the U.S. is not in immediate danger of a debt crisis, moderation of spending and economic growth will be important in the long run.

KEY EVENTS HAPPENING THIS WEEK

Monday: Home builder confidence index report for September, and 3-Month and 6-Month Bill auctions.

Tuesday: Housing starts and Building permits reports for August.

Wednesday: Mortgage bankers association (MBA) reports, Fed interest-rate decision, and Fed Chair Powell press conference.

Thursday: Initial jobless claims report for week ending on September 16, U.S. current account deficit report for second quarter, U.S. leading economic indicators and existing home sales reports for August.

Friday: S&P flash U.S. services and manufacturing PMI reports for September, and speeches from Fed Governor Lisa Cook and Fed Presidents Neel Kashkari (Minneapolis) and Mary Daly (San Francisco).

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