Global Macro
In global macro, we've seen better risk-on tones this week. Equities picking up slightly on good bank earnings and better sentiments toward tech stocks.
The UK
Headline news of UK's Hunt tearing up Truss' mini-budget, reversing tax-cut plans and reviewing the £2,500 price cap for energy yielded positive sentiments for markets. 30Y Gilt currently trading at 4.29%, plunging 48bps after Hunt's announcements.
China
Across the globe, in Asia, President Xi Jinping's 105 minute speech on Sunday boasted new growth and development prospects for China, vowing to reclaim technological independence. However, China has delayed the release of economic data indefinitely with no further explanation, inevitably creating speculations of worse than expected economic data print.
The Yen
The Yen weakened to a 32 year low trading above 149 prompting further speculations of the Japanese authorities intervening again. BoJ and FSA are scheduled to hold the 17th cooperation on financial stability, where we could see a pivot that would change the narrative for JPY.
CPI, BTC and ETH
In the vol space, as we shared in our last broadcast, demand for gamma skyrocketed into CPI and sold off right after. BTC 14 Oct ATM vols trading from 50 handle pre-CPI, up to 110 before getting smashed back down.
Since the massive quarter-end expiry, both BTC and ETH vols have been drifting lower. Skews on the other hand, have continued to rally (become less negative) with the 1W risk reversals (calls minus puts) almost flat for both BTC and ETH as the market continues to unwind CPI-related downside protection.
With little calendar events till the next FOMC in early November, crypto continuing to lag behind equities, and skews near flat, protective downside structures are the cheapest levels they have been since June.
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