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SEPTEMBER 27, 2023

DECISION DELAYED

The U.S. Securities and Exchange Commission (SEC) has once again pushed back its decision on approving the first Bitcoin exchange-traded fund (ETF) in the United States. The Bitcoin ETF, proposed by 21Shares and ARK Investment Management in April, was originally supposed to receive a verdict by September 11, however, the SEC recently announced that it has not yet reached a decision and has granted an extension until January 10. This is the third delay by the SEC, and unexpected early deferral has raised speculation that it may be related to concerns about a potential government shutdown. Moreover, the SEC has also postponed its decision on another Bitcoin ETF proposal by Global X, and major players in the ETF industry, including BlackRock and Fidelity Investments, are also eagerly awaiting the SEC’s decision.

FUTURE REMAINS UNCERTAIN

The U.S. is teetering on the edge of a government shutdown scheduled for October 1 as House and Senate lawmakers struggle to reach a consensus on spending bills. Despite some incremental progress, rival bills in both chambers have created a stalemate, raising concerns about the functioning of the government. The Senate introduced a stopgap bill that passed a procedural vote, keeping the government operational until mid-November and providing $6 billion in assistance to Ukraine. However, its future in the House is uncertain, as Speaker Kevin McCarthy must secure support for his own measure. Potential procedural obstacles and opposition from conservative hardliners further complicate the situation. Efforts are being made to find a bipartisan solution to avert the shutdown, but time is running out and the outcome remains uncertain.

RISE DESPITE HIGHER RATES

In the week ending September 15, the Mortgage Bankers Association (MBA) reported a notable improvement in mortgage applications, with a 5.4 percent increase. This positive development is noteworthy considering the 30-year fixed-rate mortgage also rose to 7.31 percent, reaching its highest level in the past four weeks. The rise in applications for home loans was driven by both conventional and FHA loans designed for purchasing properties, although they still lagged behind last year’s figures by 26 percent. Additionally, there was a noticeable increase in refinance applications, although they remained approximately 30 percent lower compared to the same week in the previous year. These trends underscore the challenges faced by potential homebuyers due to higher interest rates and a limited inventory of homes for sale. Moreover, it is also worth mentioning that the average loan size for purchases reached its highest point in six weeks, standing at $416,800. Overall, the latest data reflects the ongoing impact of market conditions on the housing sector, while indicating some resilience in application numbers despite the higher borrowing costs and supply constraints.

DECLINE AMIDST HISTORICAL RISE

U.S. Treasury yields have experienced a decline after reaching a 15-year high the previous day. Specifically, the yield on the 10-year Treasury dropped by over 5 basis points to 4.501%, down from Tuesday’s peak of 4.566% – the highest level seen since 2007. At the same time, the 2-year Treasury yield also decreased by more than 2 basis points to 5.052%. This reduction in yields was largely influenced by disappointing economic data. For instance, August’s new home sales fell short of expectations, and consumer confidence for September dipped below economists’ forecasts. These events, coupled with the Federal Reserve’s indication of impending interest rate increases, have raised concerns among investors regarding the future trajectory of the economy.

INTERNATIONAL NEWS

The value of the British pound, commonly referred to as sterling, has plummeted to its lowest level in six months against the US dollar. This decline comes as the Bank of England (BoE) signaled a change in its approach to interest rates. With the country’s economy deteriorating and inflation subsiding, the market is no longer expecting any further rate hikes from the central bank this year. In fact, there are increasing expectations that rate cuts may be on the horizon. This has led to a significant drop of over 4% in the value of sterling this month alone. In addition to its struggle against the US dollar, sterling has also faced pressures against the euro. The British currency has dropped to its lowest level against the euro since May, currently sitting at 86.87 pence. Furthermore, the recent shift in monetary policy has contributed to a steady decline in sterling since its peak in July.  Nonetheles, it is important to note that despite its recent decline, sterling is still up approximately 18% compared to its value one year ago.

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