Bond Traders Are Kept in Limbo After Powell Offers Few Clues

Bond

Summary:

The repricing had left traders largely in sync with the Fed, which has adopted a wait-and-see approach as it watches for inflation to come back closer to its 2% target.

Bond traders emerged from the Federal Reserve’s meeting exactly where they were before it began: with little conviction about where interest rates are headed as President Donald Trump casts uncertainty over the direction of the economy.

Treasury yields briefly jumped after the central bank’s statement appeared to indicate that it held rates steady because its progress on taming inflation had ebbed. But Chair Jerome Powell quickly swatted away those worries — saying he expects consumer-price increases to continue to slow — and yields came back down, ending the day virtually unchanged and echoing the swings in the US equity market.

“This is a Fed that’s not in a hurry to take any further action,” Jeffrey Rosenberg, portfolio manager at BlackRock Inc., said on Bloomberg Television.

The Fed’s decision to pause the cycle of interest-rate cuts it kicked off in September was already widely anticipated on Wall Street. Since late last year, yields have risen sharply on expectations that the resilient economy, sticky inflation and policy shifts by Trump would prevent the US central bank from easing monetary policy much further.

The repricing had left traders largely in sync with the Fed, which has adopted a wait-and-see approach as it watches for inflation to come back closer to its 2% target. Trump has also cast considerable uncertainty over the outlook by threatening to slap tariffs on imports and promising to lower taxes, both of which could put upward pressure on inflation and pour another round of stimulus onto the economy.

Powell did little to chart the bond market’s direction one way or the other. He said he expects that the still-restrictive level of interest rates will continue to slow inflation, which appeared to ease some concern that the Fed could shift gears to raising interest rates again. He also declined to comment on how Trump’s policies may affect the Fed’s path, underscoring that the bank will follow where the data lead.

The stock market’s reaction was similar to the bond market’s. The S&P 500 Index dropped after the Fed’s announcement only to recover once Powell spoke. It ended slightly lower on the day, held down by worries about Trump’s still-unclear tariff policies and the threat to tech stocks posed by a Chinese company’s rollout of a low-cost artificial intelligence product. Bond Traders Are Kept in Limbo After Powell Offers Few Clues_1

Bond Traders Are Kept in Limbo After Powell Offers Few Clues_1

Treasury bonds ended Wednesday’s session little changed across the curve. The benchmark 10-year note — a key baseline for other debt — was flat at 4.53%, while the yield on two-year Treasuries was up 2 basis points at around 4.2%.

What Bloomberg strategists say...

“Policymakers are in a wait-and-see mode on how Trump’s policies play out. Powell also noted there have been two good inflation readings in a row and importantly expectations at the back-end are not going up, where it really matters.” — Alyce Andres, strategist. Read more on MLIV.

For the bond market, the focus remains squarely on whether — and when — the Fed will cut rates next.

“There’s heightened caution in the bond market at the moment,” said Lon Erickson, a portfolio manager at Thornburg Investment Management in Santa Fe, New Mexico. “There’s nervousness around the outcome of those policies of the administration.”

While expectations for a March rate reduction had increased earlier this week during a tech-driven rout in stocks that fueled demand for Treasuries, the swaps market is now pricing only a narrow chance of such a reduction.

Still, traders had ratcheted up bullish bets on Treasuries in the leadup to the meeting in hopes of a signal from the Fed that a move in March was on the table.

Wall Street economists, meanwhile, have diverged on their forecasts for the Fed’s policy path, though most have trimmed their expectations in recent months. Ahead of the January meeting, only Morgan Stanley was among major Wall Street banks that still saw a potential reduction at the next gathering in March.

“For the bond market, we think it’s a holding pattern for the next couple of quarters,” Guneet Dhingra, head of US rates strategy at BNP Paribas, said just ahead of the decision. “We think the Fed is on hold for the remainder of 2025.”

Source: Bloomberg

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Manuel

Cryptocurrency

Bitwise Investment Advisers LLC has formally submitted a registration statement to the U.S. Securities and Exchange Commission (SEC) for a proposed Bitwise Dogecoin ETF.

This exchange-traded fund (ETF) aims to provide investors with direct exposure to dogecoin’s (DOGE) market price. Dated Jan. 28, 2025, the filing outlines the fund’s structure, indicating that it will hold dogecoin rather than derivatives and will rely on the CF Dogecoin-Dollar Settlement Price to track its value. This pricing benchmark, managed by CF Benchmarks Ltd., derives from aggregated trade data across major dogecoin exchanges.

Regulatory approval would allow the ETF’s shares to be listed on a yet-to-be-determined exchange under an unspecified ticker symbol. Designed as a passively managed fund, it will not employ active trading strategies to respond to price fluctuations.

Shares of the ETF will be issued and redeemed in 10,000-share increments by authorized participants, according to the filing. Investors will be able to buy and sell shares on the open market, though prices may differ from the fund’s net asset value (NAV).

Bitwise Investment Advisers LLC will act as the fund’s sponsor, collecting an annual management fee, though specific costs have not been disclosed. Coinbase Custody Trust Company LLC will oversee the secure storage of the fund’s DOGE holdings.

The filing makes clear that the ETF will not participate in staking or lending, stating:

Neither the trust, nor the sponsor, nor the dogecoin custodian, nor any other person associated with the trust will, directly or indirectly, engage in actions where any portion of the trust’s dogecoin is used to earn additional dogecoin or generate income or other earnings.

This distinction separates the ETF from other cryptocurrency investment vehicles that incorporate yield-generating mechanisms.

The registration request comes amid a growing push by asset managers to introduce cryptocurrency-based ETFs, particularly in the wake of former SEC Chair Gary Gensler’s departure.

Optimism within the industry has increased following the approval of spot bitcoin and ethereum ETFs, leading to speculation that additional cryptocurrency funds could soon gain regulatory clearance. Among the digital assets being considered for ETFs are XRP, solana (SOL), and litecoin (LTC), as financial firms seek broader integration of crypto assets into traditional investment markets.

While the SEC’s stance on these proposals remains uncertain, industry leaders see the expansion of cryptocurrency ETFs as a step toward greater institutional acceptance.

Source: Bitcoin.com

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Manuel

Central Bank

Economic

The Federal Reserve held interest rates steady on Wednesday and gave little insight into when further reductions in borrowing costs may take place in an economy where inflation remains above target, growth continues, and the unemployment rate is low.

Emerging from their first policy meeting during President Donald Trump's second term in the White House, Fed Chair Jerome Powell said U.S. central bank officials are "waiting to see what policies are enacted" before judging their effects on inflation, employment and overall economic activity, and they are in no hurry to adjust rates further.

Trump returned to power last week with promises of import tariffs, an immigration crackdown, tax cuts and looser regulation. He also said he would demand lower interest rates and expected the Fed to listen to him. Powell, speaking in a press conference after the end of the central bank's latest two-day policy meeting, declined to respond to the Republican president's statements, and Trump himself has not yet commented on the Fed's decision to hold rates steady on Wednesday.

After the Fed lowered rates three times in the latter part of last year, inflation has largely moved sideways in recent months, and the central bank dropped from its latest policy statement language saying that inflation "has made progress" towards its 2% inflation goal, noting only that the pace of price increases "remains elevated."

Recent key inflation readings remain about half a percentage point or more above the Fed's target.

Fed officials say they largely believe the progress in lowering inflation will resume this year, but have now put rates on hold as they await data to confirm it.

"Economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid," the central bank's policy-setting Federal Open Market Committee said in its latest policy statement.

"In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks," it said.

Powell said in his press conference that "we do not need to be in a hurry to adjust our policy stance" and monetary policy is "well-positioned" for the challenges at hand. He noted there are risks to cutting rates too aggressively, saying "we know that reducing policy restraint too fast or too much could hinder progress on inflation."

With the new statement, puts the Fed in a holding pattern as officials await further inflation and jobs data and clarity on the impact of Trump's policies.

Short-term interest rate futures showed that investors expect the central bank to hold off on cutting rates again until June. U.S. stocks closed down on the day but off their lows, while U.S. bond yields were little changed. The dollar (.DXY), opens new tab was slightly stronger against a basket of currencies.

'MILDLY HAWKISH'

The Fed's decision to hold the policy rate steady was widely anticipated following three consecutive rate cuts in 2024 that reduced the benchmark rate by a full percentage point.

There is debate at the central bank about how much further rates may need to fall, with policymakers anticipating perhaps two quarter-percentage-point rate cuts over the course of the year.

"The Fed seems to think the economy is stuck with a low unemployment rate and elevated inflation," said Brian Jacobsen, chief economist at Annex Wealth Management. "The statement could be read to be mildly hawkish, suggesting that a little jolt to rates could kick the economy out of this equilibrium."

Lindsay Rosner, head of multi-sector fixed-income investing at Goldman Sachs Asset Management, said, "while we continue to think the Fed's easing cycle has not yet run its course, the FOMC will want to see further progress in the inflation data to deliver the next rate cut, highlighted by the fact they removed the reference on inflation making progress."

Source: Reuters

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Manuel

Economic

The U.S. trade deficit in goods widened to a record high in December, likely as businesses front-loaded imports of industrial supplies and consumer goods in anticipation of broad tariffs from President Donald Trump's new administration.

The deterioration in the goods trade deficit reported by the Commerce Department on Wednesday raises the risk of a sharper slowdown in gross domestic product growth in the fourth quarter than economists had anticipated when the government publishes its advance GDP estimate for the last quarter on Thursday.

The report also showed inventories at wholesalers and retailers being drawn down last month. A wider trade deficit as a result of an influx of imports is usually offset by a rise in inventories in the calculation of GDP. Trade and inventories are the most volatile components of GDP.

The Atlanta Federal Reserve slashed its fourth-quarter GDP estimate to a 2.3% annualized rate from a 3.2% pace earlier. The economy grew at a 3.1% rate in the July-September quarter.

"It seems reasonable to think that a substantial share is due to attempts to import raw materials before prices potentially jump after the imposition of new tariffs," said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics.

"Those pre-emptive purchases probably continued into January. A similar wave of pre-emptive buying is likely putting upward pressure on underlying imports too."

The goods trade gap increased 18.0% to $122.1 billion last month, the largest since the government started tracking the series in 1992, the Commerce Department's Census Bureau said. Goods imports increased $10.8 billion, or 3.9%, to $289.6 billion. Exports fell $7.8 billion, or 4.5% to $167.5 billion.

Trump has promised to impose or massively raise tariffs on imported goods, including from China, Canada and Mexico. The tariffs on Canadian and Mexican goods could come on Feb. 1.

"The trade deficit, especially on a bilateral basis, will receive increased attention as the Office of the U.S. Trade Representative begins its examination of foreign trade practices to account for those that are unfair to the U.S., and the review of the Economic and Trade Agreement between the U.S. and China," said Kathy Bostjancic, chief economist at Nationwide.

Stocks on Wall Street were mostly flat. The dollar gained versus a basket of currencies. U.S. Treasury yields rose. Record US Goods Trade Deficit Seen Cutting Into Fourth-Quarter GDP Growth_1

Record US Goods Trade Deficit Seen Cutting Into Fourth-Quarter GDP Growth_1

WEAK EXPORTS

The rise in imports followed a 4.3% surge in November. Last month's advance was led by an 18.9% jump in imports of industrial supplies, which include petroleum. Imports of consumer goods increased 3.1% while those of capital goods gained 1.7%. But imports of motor vehicles decreased 5.5%.

There were also declines in imports of food and other goods.

The economy is expanding well above the 1.8% that Federal Reserve officials regard as the non-inflationary growth pace.

The U.S. central bank is expected to leave its benchmark overnight interest rate in the 4.25%-4.50% range at the end of a two-day policy meeting on Wednesday, having reduced it by 100 basis points since September. The policy rate was hiked by 5.25 percentage points in 2022 and 2023 to tame high inflation.

A strong dollar because of the still relatively tight monetary policy stance could be making U.S. manufactured goods less competitive on the global market, undercutting exports.

The dollar gained 9.0% against the currencies of the United States' main trade partners in 2024.

With wholesale inventories falling 0.5% and stocks at retailers declining 0.3% last month, some economists were not fully convinced that pre-emptive buying of foreign goods ahead of tariffs accounted for the jump in the trade deficit.

"If firms were stocking up, then we should expect to see a spike in December inventories," said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets. "I would expect some giveback on the trade deficit in January."

The decline in wholesale inventories was across long-lasting manufactured and nondurable goods.

Retail stocks were pulled down by a 1.2% drop in inventories of motor vehicles and parts. Excluding motor vehicles and parts, retail inventories rose 0.2% after increasing 0.4% in November. This component goes into the calculation of GDP.

"The surprise declines in wholesale and retail inventories point to a big drag on growth from private inventories too," said Pantheon Macroeconomics' Allen. "That implies companies in these sectors have underestimated the rush of pre-emptive purchases, potentially encouraging even more imports ahead as inventories are rebuilt."

Source: Reuters

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Warren Takunda

Cryptocurrency

Bitcoin copying gold’s all-time highs is a “matter of time” as the precious metal outperforms BTC and the US dollar.

In an X thread on Jan. 28, trading resource The Kobeissi Letter said that gold performance in 2025 is “telling us something.”

Bitcoin flags as gold disrupts the norm

Bitcoin may currently be trading in limbo amid a lack of directional catalysts, but one macro asset far from rangebound is gold.

Data from Cointelegraph Markets Pro and TradingView confirms that BTC/USD has gained 10% year-to-date, with XAU/USD up around half of that. In 2024, the latter gained 20%. Bitcoin Price Risks 'Critical' Gold Breakdown After 20% Annual Gains_1

Bitcoin Price Risks 'Critical' Gold Breakdown After 20% Annual Gains_1

BTC/USD vs. XAU/USD 4-hour chart. Source: Cointelegraph/TradingView

The precious metal has ignored volatility shocks such as this week’s DeepSeek AI scare and has also tempered its traditional inverse correlation to US dollar strength, Kobeissi reports.

“Gold prices have risen in a straight-line higher, even as volatility shook the S&P 500. In fact, even as the US Dollar hit a new 52-week high and the 10-year note yield broke 4.80%, gold surged,” it wrote.

“Historically speaking, gold should be down sharply. The opposite is happening.” Bitcoin Price Risks 'Critical' Gold Breakdown After 20% Annual Gains_2

Bitcoin Price Risks 'Critical' Gold Breakdown After 20% Annual Gains_2

S&P 500 vs. gold chart. Source: The Kobeissi Letter/X

Bitcoin’s relationship to dollar strength, as measured via the US dollar index (DXY), has long been a topic of discussion.

For market participants, however, the outcome for BTC/USD in the face of rampant gold upside is clear.

“All things aside, Gold is about to make a new all-time high. Matter of time before Bitcoin follows,” trader, analyst and entrepreneur Michaël van de Poppe told X followers on Jan. 29. Bitcoin Price Risks 'Critical' Gold Breakdown After 20% Annual Gains_3

Bitcoin Price Risks 'Critical' Gold Breakdown After 20% Annual Gains_3

US dollar index (DXY) 1-day chart. Source: Cointelegraph/TradingView

BTC price needs key rebound

As Cointelegraph reported, a popular theory suggests that Bitcoin lags gold by several months before ultimately copying its trajectory.

Not everyone, however, believes that this status quo will continue for long.

Analyzing the Bitcoin-to-gold ratio, popular X analytics account Northstar warned that a “critical” level was in danger of being violated.

The ratio set new all-time highs of its own in December 2024.

“Bitcoin should breakout versus gold after this consolidation here, BUT if the ratio falls below 34 the bull run may end,” one of several recent posts on the topic read.

“No need for any narrative or bias. Just observe the evidence as it unfolds. In this case it will be very clear...one way or the other.” Bitcoin Price Risks 'Critical' Gold Breakdown After 20% Annual Gains_4

Bitcoin Price Risks 'Critical' Gold Breakdown After 20% Annual Gains_4

BTC/XAU ratio chart. Source: Northstar/X

An accompanying chart suggested that, in the best scenario, BTC price strength should gain on gold for “a few more weeks/months.”

Source: Cointelegraph

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Manuel

Forex

Economic

The Bank of Canada cut interest rates by a quarter percentage point and dropped guidance on any further adjustments to borrowing costs as US President Donald Trump’s tariff threat clouds the outlook.

Policymakers led by Governor Tiff Macklem lowered the benchmark overnight rate to 3% on Wednesday. The move was widely anticipated by both markets and economists in a Bloomberg survey. Bank of Canada Cuts and Drops Rate Guidance as Tariffs Loom_1

Bank of Canada Cuts and Drops Rate Guidance as Tariffs Loom_1

“The economy is expected to strengthen gradually and inflation to stay close to target. However, if broad-based and significant tariffs were imposed, the resilience of Canada’s economy would be tested,” the bank said in its statement.

Bonds surged as the market absorbed the central bank’s decision not to provide guidance on future rate moves. The yield on Canada’s two-year notes slid some four basis points to 2.79%, the lowest since 2022. The loonie maintained the day’s losses against the US dollar, trading at C$1.4448 as of 10:03 a.m. in Ottawa.

Officials called the 200 basis points of easing since June “substantial.” The smaller reduction follows to back-to-back half percentage point cuts in October and December.

For now, the central bank sees inflation holding close to the 2% target well into 2026 and said the upside and downside risks to price pressures were “reasonably balanced.” Policymakers said they see evidence that rate cuts are helping to boost the economy through consumption and housing activity, and that existing excess supply would be “gradually absorbed” over the next few years.

Still, the threat of a tariff war looms large, and is “clouding the economic outlook,” the bank said. Trump has threatened to levy 25% tariffs as soon as this Saturday, and Canada’s government has vowed to retaliate.

Combined, the communications suggest the central bank isn’t likely to make further adjustments to monetary policy until the specifics of Trump’s trade policy become clearer. Absent that threat, Canada’s economy looks increasingly headed for a soft landing.

“The overnight rate stands at 3%,” Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, said in a report to investors. “Even without the risk of a trade war, that in itself would imply some caution, because nobody can be too sure about where the neutral rate lies, and how low rates have to go to deliver still-needed stimulus.”

Charles St-Arnaud, chief economist at Alberta Central, said in an email the lack of any forward guidance will grab the most attention from Wednesday’s announcement.

“This suggests either that 1) the Bank of Canada believes that it has cut enough over the past year to stimulate the economy enough, or 2) the level of uncertainty around the outlook, especially given the tariff threat, is too elevated to be able to provide any guidance.”

In an accompanying monetary policy report, officials produced forecasts independent of the tariffs, but also laid out a scenario that examined how a prolonged trade dispute — in which the US and Canada impose 25% tariffs on each other — could disrupt the economy.

Overall, the impact of a trade battle would be higher prices in Canada, even as the economy was substantially weakened. In that scenario, the effect of price increases from higher import costs and a weaker loonie would more than offset the drag from falling exports, business investment and demand.

In prepared remarks, Macklem said while “monetary policy has worked to restore price stability,” a broad-based trade conflict would “badly hurt” economic activity, but that the higher cost of goods “will put direct upward pressure on inflation.”

“With a single instrument — our policy rate — we can’t lean against weaker output and higher inflation at the same time,” Macklem said, adding the central bank would need to “carefully assess” the downward pressure on inflation, and weigh that against the upward pressure on inflation from “higher input prices and supply chain disruptions.” Bank of Canada Cuts and Drops Rate Guidance as Tariffs Loom_2

Bank of Canada Cuts and Drops Rate Guidance as Tariffs Loom_2

In the accompanying monetary policy report, the central bank lowered its forecast for economic growth in 2025 due to the federal government’s lower immigration targets. The bank now expects the economy to expand 1.8% in 2025 and 2026, down from 2.1 and 2.3% in previous projections. The central bank trimmed estimates for business investment and exports, but boosted its consumption forecast.

The bank estimated that interest rate divergence with the Federal Reserve was responsible for about 1% of the depreciation in the Canadian dollar since October.

Officials also announced that the central bank would end quantitative tightening on March 5, when it says it will restart asset purchases “as part of normal balance sheet management.” Earlier this month, Deputy Governor Toni Gravelle had signaled the program would soon end.

Policymakers also made changes to deposit rate, which will now be set 5 basis points below the overnight rate as of Thursday, a move that’s likely meant to incentivize a better flow of settlement balances or reserves across financial market participants.

Macklem and Senior Deputy Governor Carolyn Rogers will speak to reporters at 10:30 a.m. Ottawa time. The governor will also do an interview with Bloomberg News on Wednesday afternoon.

Source: Bloomberg

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Manuel

Cryptocurrency

Trump Media and Technology Group Corp. (Nasdaq: DJT), operator of the social media platform Truth Social and the video streaming platform Truth+, announced on Jan. 29 its expansion into financial services with the launch of a new brand, Truth.Fi. The company stated that its board of directors approved a strategy to enter the financial technology sector.

“To diversify the company’s cash and cash-equivalent reserves of over $700 million as of December 31, 2024, the board has approved the investment of up to $250 million to be custodied by Charles Schwab,” the announcement details, adding:

In addition to traditional investment vehicles, these funds may be allocated to … bitcoin and similar cryptocurrencies or crypto-related securities.

Besides crypto assets, the initiative includes plans to invest these funds in customized separately managed accounts (SMAs) and exchange-traded funds (ETFs). These investments will be managed in collaboration with Charles Schwab, while an affiliate of Yorkville Advisors will act as the Registered Investment Adviser for the new financial products, which aim to support American growth industries and the “Patriot Economy.”

Trump Media and Technology Group (TMTG) is closely tied to President Donald Trump, who holds a majority stake in the company. He founded TMTG in 2021 after being banned from major social media platforms and launched Truth Social in 2022 as an alternative for free expression. In December 2024, Trump transferred his $4 billion stake in TMTG into a revocable trust controlled by his son, Donald Trump Jr., who holds exclusive voting and investment authority. While Trump is not involved in daily operations, his ownership and the platform’s alignment with his political brand reinforce his connection to the company.

TMTG CEO and Chairman Devin Nunes expressed enthusiasm for the initiative, positioning it as a natural extension of the company’s mission. “We look forward to launching Truth.Fi, introducing TMTG’s investment vehicles, and unlocking synergies,” he stated. He emphasized that the company has already established a free-speech social media platform and a streaming service and is now moving into decentralized finance. The executive noted:

Developing America First investment vehicles is another step toward our goal of creating a robust ecosystem through which American patriots can protect themselves from the ever-present threat of cancellation, censorship, debanking, and privacy violations committed by Big Tech and woke corporations.

The company plans to roll out these financial products in 2025 as agreements are finalized and regulatory approvals are secured.

In recent years, Trump has taken a more pro-cryptocurrency stance. In January 2025, he signed an executive order establishing a working group to review digital asset regulations and explore the creation of a national bitcoin reserve, marking a significant shift from previous policies. He also appointed David Sacks as the White House AI and crypto czar and selected a pro-crypto SEC chair, signaling his administration’s commitment to the digital assets sector. These moves reflect Trump’s evolving perspective on cryptocurrencies and his intent to position the U.S. as a leader in the field.