SignalPlus Volatility Column (20240201): US Treasury Roller Coaster, Digital Currency Under Pressure and Declining

Yesterday (31 JAN), the Federal Reserve held its first FOMC meeting of the new year, announcing that it would maintain the current interest rates, in line with market expectations. In subsequent interviews, Federal Reserve officials made hawkish statements, indicating that they would not lower interest rates until they have more confidence that inflation can sustainably move towards 2%. They also removed the wording "may further tighten policy" from the statement. Chairman Powell further clarified that "it is unlikely to lower rates in March," which is seen as a direct denial of the market's growing expectations for looser policies. Currently, the swap market's expectations for a rate cut in March have dropped to 36%. Regarding U.S. Treasuries, despite the ADP employment numbers coming in below expectations (recorded at 107,000, expected 145,000) and a slightly lower-than-expected labor cost index causing a decline in yields, hawkish remarks during the FOMC meeting pushed yields up again. On the other hand, the U.S. Treasury hinted that it is unlikely to increase the issuance scale before next year, boosting market demand for U.S. Treasuries and causing yields to decline again, with the current two-year/ten-year yields at 4.231% / 3.942%. The three major U.S. stock indices closed lower under pressure, with the Dow/S&P/NASDAQ down 0.83% / 1.6% / 2.2%, giving back all the gains of the past week in just a few minutes and marking the largest single-day drop of the year.

Source: SignalPlus, Economic Calendar

Source: Binance & TradingView

Digital currencies, as risk assets, also faced downward pressure, with BTC dropping to around $42,000 and ETH around $2,270. The large-scale bullish strategy trades stimulated by several days of consecutive gains also lost enthusiasm today, with market trading volume declining over the past 24 hours. The Put Spread strategy for February became the focus of yesterday's market, while the recently rising Vol Skew returned to near zero. At the same time, the overall volatility levels of both BTC and ETH gradually decreased after the FOMC ended, dropping by about 3-4% in volatility.

Source: Deribit (as of 31 JAN 16:00 UTC+8)

Source: SignalPlus

Data Source: Deribit

Source: SignalPlus

Source: Deribit Block Trade

Source: Deribit Block Trade