10/5/23 Roundup
Hi all,
This is Dylan LeClair, presenting this week’s Onramp Weekly Roundup.
Before we get started… If you’re a HNWI or Institution looking for the best way to get exposure to bitcoin, Onramp Bitcoin could be the right fit for you – schedule a chat with us to discuss your situation & needs.
And now, here’s the weekly roundup…
The Bond Bubble Burst Continues
Long-term U.S. Treasuries are experiencing a historic decline, with 30-year bond yields reaching levels not seen since 2007. This steep drop, particularly in bonds maturing in 10 years or more, echoes past market downturns such as the collapse following the dot-com bubble. The Federal Reserve’s stringent approach to inflation in tandem with an increasingly precarious fiscal environment, has disrupted the traditional allure of long-maturity debt and brought about questions of a debt spiral.
The Yield Curve’s Ominous Bear Steepener
Complicating the landscape is the behavior of the yield curve. For over a year, the curve was inverted—a typical harbinger of recession. However, the past few weeks have seen an unusual correction. Unlike most historical instances where the curve “steepens” due to falling short-term rates, what we’re seeing now is a “bear steepener,” characterized by rising long-term yields.
This rare occurrence has been followed by recessions and market downturns in the past. While some question the yield curve’s reliability as a recession indicator, the current bear steepening suggests that an economic downturn could be imminent. This is particularly concerning given the Fed’s ongoing commitment to restrictive monetary policy, making the situation ripe for potential market volatility and economic uncertainty.
All Eyes on the Equity Markets
Barclays’ analyst Ajay Rajadhyaksha suggests that only a stock market crash could halt the bond market’s decline. Unlike previous cycles, traditional bond backstops are dwindling; the Fed has shifted from a net buyer to a net seller, and foreign institutional buying has slowed. Rajadhyaksha points out that there’s no “magic yield level” that will stabilize bonds under current conditions, especially with the Fed unlikely to alter its monetary policy.
Barclays argues that equity markets are disconnected from the realities of the bond market, noting that stocks have significant room to devalue before bonds stabilize. The bank’s stance highlights a stark divergence between equity valuations and long-end bond rates. Shown below is a visual depicting price to earnings ratio for the S&P 500 index and real 10-year yields.
This isn’t your typical Fed tightening cycle…
Podcast of the Week
E019: The Institutional Allocator’s Journey to Bitcoin-only with Glenn Cameron
In the latest discussion on The Last Trade, Glenn Cameron, an institutional allocator and advisor at Cartwright, delves into his personal and professional journey into Bitcoin. Cameron discusses the challenges and intricacies of investing in bitcoin funds, emphasizing the importance of due diligence, robust custody solutions, and a deep understanding of the asset. He also touches on the evolving regulatory landscape and the potential of Bitcoin to disrupt traditional financial systems. Throughout the conversation, Cameron advocates for a Bitcoin-focused investment approach, citing its unique value proposition as a digital store of value and its ability to offset negative real returns in traditional asset classes.
Check out the full episode here.
Closing Note
Wrapping up this week’s digest, Onramp Bitcoin invites you to explore our offerings on our website.
With an industry-leading multi-party custody solution, Onramp allows Bitcoin withdrawals without triggering a taxable event. Onramp stands as an optimal solution for HNWI and institutions seeking Bitcoin exposure prior to transitioning to self-custody.
If Onramp’s offerings align with your needs, or those of someone you know, feel free to schedule a chat with us here.
Onward and Upward,
Dylan LeClair