Insights 
VT 
The latest auction for the United States 10-year note resulted in a yield of 4.117%, compared to a previous yield of 4.033%. This development comes amidst complex economic conditions and significant fiscal concerns.
While geopolitical dynamics unfold with Israel and Hamas agreeing on the first phase of a Gaza peace plan, other financial markets are responding to shifts in economic data and political factors. USD/JPY has surged above 152.50 due to fiscal apprehensions in Japan.
Currency Market Challenges
EUR/USD continues to decline, pressured by weak German data and political disorder in France, while GBP/USD faces selling pressure, dipping below the 1.3400 mark. Amidst these movements, Gold hovers above $4,000 per troy ounce, driven by safe-haven demand.
The Ethereum market saw Bit Digital increase its treasury holdings, now accumulating 150,244 ETH, propelling its price beyond $4,500 after securing $150 million through a convertible note offering. The US faces a still ongoing government shutdown, which started on October 1st, contributing to the uncertainty of the economic outlook.
The weak 10-year Treasury auction, pushing yields up to 4.117%, suggests we should prepare for higher interest rates. With the recent September inflation report showing a persistent 3.9% CPI and the US government shutdown now in its second week, bond prices are likely to fall further. We believe positioning for rising yields through interest rate swaps or by buying puts on Treasury futures is a sound strategy.
Broad-based US dollar strength is the dominant theme, and we expect this to continue. The Euro is weak due to Germany’s contracting industrial production, down 0.8% last quarter, and French political uncertainty, while the Yen is suffering as USD/JPY breaks 153.00. We are using options to build long dollar positions against both the Euro and the Yen, targeting a move toward 1.1500 for EUR/USD.
Market Fear and Safe Haven Demand
Market fear is high, with the Dow Jones struggling and Gold holding above $4,000 an ounce. The US government shutdown, which is historically lengthy when Congress is divided, is fueling this uncertainty. We see the VIX index, which has already risen from 15 to 23 in the last two weeks, as a direct way to trade this fear by purchasing VIX call options as a portfolio hedge.
The announcement of a Gaza peace plan is a positive headline, but it is not driving the market. The more immediate concerns of a US government shutdown and European instability are keeping safe-haven demand strong. This development likely puts a cap on oil prices, making it a good time to consider selling call options on crude oil futures, as the geopolitical risk premium shrinks.
