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U.S. Breakeven Inflation Comments

I just refreshed my favourite U.S. breakeven inflation chart (above), and I was surprised by how placid pricing has been. This article gives a few observations regarding the implications of TIPS pricing.Background note: the breakeven inflation rate is …

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I just refreshed my favourite U.S. breakeven inflation chart (above), and I was surprised by how placid pricing has been. This article gives a few observations regarding the implications of TIPS pricing.

Background note: the breakeven inflation rate is the inflation rate that results in an inflation-linked bond — TIPS in the U.S. market — having the same total return as a conventional bond. If we assume that there are no risk premia, then it can be interpreted as “what the market is pricing in for inflation.” I have a free online primer here, as well as a book on the subject.

(As an aside, I often run into people who argue that “breakeven inflation has nothing to do with inflation/inflation forecasts.” I discuss this topic in greater depth in my book, but the premise that inflation breakevens have nothing to do with inflation only makes sense from a very short term trading perspective — long-term valuation is based on the breakeven rate versus realised inflation.)

The top panel shows the 10-year breakeven inflation rate. Although it scooted upwards after the pandemic, it is below where is was pre-Financial Crisis, and roughly in line with the immediate post-crisis period. (Breakevens fell at the end of the 2010s due to persistent misses of the inflation target to the downside.) Despite all the barrels of virtual ink being dumped on the topic of inflation, there is pretty much no inflation risk premium in pricing.

The bottom panel shows forward breakeven inflation: the 5-year rate starting 5 years in the future. (The 10-year breakeven inflation rate is (roughly) the average of the 5-year spot rate — not shown — and that forward rate.) It is actually lower than its “usual” level pre-2014, and did not really budge after recovering from its post-recession dip. (My uninformed guess is that the forward rate was depressed because inflation bulls bid up the front breakevens — because they were the most affected by an inflation shock — while inflation bears would have focussed more on long-dated breakevens, with the forward being mechanically depressed as a result.)

Since I am not offering investment advice, all I can observe is the following.

  • Since it looks like one would need a magnifying glass to find an inflation risk premium, TIPS do seem like a “non-expensive” inflation hedge. (I use “non-expensive” since they do not look cheap.) Might be less painful than short duration positions (if one were inclined to do that).

  • Breakeven volatility is way more boring than I would have expected based on the recent movements in inflation. The undershoot during the recession was not too surprising given negative oil prices and expectations of another lost decade, but the response to the inflation spike was restrained.

  • The “message for the economy” is that market pricing suggests that either inflation reverts on its own, or the Fed is expected to break something bigger than a few hapless regional banks if inflation does not in fact revert.

Otherwise, I am preparing for a video panel on MMT at the Canadian Economics Association 2023 Conference on Tuesday. (One needs to pay the conference fee to see the panel.) I have also been puttering around with my inflation book. I have a couple draft sections that I might put up in the coming days/weeks.

Email subscription: Go to https://bondeconomics.substack.com/ 

(c) Brian Romanchuk 2023

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VanEck Ethereum Futures ETF Debuts In The U.S.

The United States cryptocurrency sector received a jolt on Monday, as VanEck today marks the inaugural debut of its Ethereum-based exchange-traded fund…

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October 2, 2023

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The United States cryptocurrency sector received a jolt on Monday, as VanEck today marks the inaugural debut of its Ethereum-based exchange-traded fund (ETF). The innovative investment instrument is designed to offer investors indirect exposure to the second-largest cryptocurrency by market capitalization. This exposure is achieved by investing in contracts of Ethereum (ETH) futures.

The product, listed on VanEck’s website, commenced trading on October 2nd on the Chicago Board Options Exchange (CBOE). This milestone establishes VanEck as one of the pioneering U.S. investment managers to introduce an ETF grounded in Ether futures—cash-settled ETH futures contracts traded on the Chicago Mercantile Exchange, a registered exchange supervised by the Commodity Futures Trading Commission (CFTC).

VanEck had disclosed its plans to launch an ETF based on Ether futures last week, indicating that it had received the eagerly awaited approval from the Securities and Exchange Commission (SEC).

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The competition for Ethereum futures-based ETFs gained momentum earlier this year when several managers, including Bitwise, ProShares, VanEck, and Grayscale, submitted proposals for such products. As of the latest count, approximately 15 entities have submitted their proposals to the SEC this year.

While U.S. regulators greenlit the launch of the first ETFs based on Bitcoin futures in 2021, they had not previously endorsed funds tied to futures of other cryptocurrencies. VanEck, at that time, emerged as the second manager in the nation to introduce a BTC futures ETF.

In addition to VanEck’s Ethereum futures performance-focused product, several others also made their debut on this Monday. ProShares, the same company that introduced the first U.S. Bitcoin futures ETF in 2021, introduced the ProShares Ether Strategy ETF, along with two others offering a blend of BTC and ETH exposure. Bitwise, another manager, announced the launch of two ETH futures ETFs: the Bitwise Ethereum Strategy ETF and the Bitwise Bitcoin and Ether Equal Weight Strategy ETF.

The crypto community is still awaiting the introduction of the first spot ETFs for both Bitcoin and ETH. In August, the SEC delayed it decision to issue spot crypto ETFs, although no official reason was cited in the decision.

The post VanEck Ethereum Futures ETF Debuts In The U.S. appeared first on The Dales Report.

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Study uncovers function of mysterious disordered regions of proteins implicated in cancer

Study uncovers function of mysterious disordered regions of proteins implicated in cancer Credit: Courtesy of Dana-Farber Cancer Institute Study uncovers…

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October 2, 2023

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Study uncovers function of mysterious disordered regions of proteins implicated in cancer

Credit: Courtesy of Dana-Farber Cancer Institute

Study uncovers function of mysterious disordered regions of proteins implicated in cancer

Study Title: A disordered region controls cBAF activity via condensation and partner recruitment

Publication: Cell, Monday, October 2, 2023 (https://www.dana-farber.org/newsroom/news-releases/2023/study-uncovers-function-of-mysterious-disordered-regions-of-proteins-implicated-in-cancer/)

Dana-Farber Cancer Institute author: Cigall Kadoch, PhD

Summary:

New research from Dana-Farber Cancer Institute researcher Cigall Kadoch, PhD, along with colleagues at Princeton University and the Washington University in St. Louis, reveals a key role for intrinsically disordered proteins known as IDRs that are implicated in a wide range of human diseases, from cancer to neurodegeneration. Kadoch’s team studies large protein complexes called mSWI/SNF or BAF complexes that control which genes turn on and off in cells. BAF complexes are the most frequently mutated cellular entities, second only to TP53, a tumor suppressor. Intrigued by the fact that over half of the complex mass contains IDRs, including the ARID1A/B subunits in which a high frequency of disease-causing lesions, or mutations, accumulate, the group set out to define their contributions. They found that these IDR regions lead to two important functions: first, condensation, the tight clustering of proteins in close distance to one another in the nucleus, and second, protein-protein interactions that are required for the proper positioning and activity of BAF complexes along DNA. Kadoch and colleagues show that the right interactions depend on highly specific “sequence grammars” within the protein’s IDR amino acid code, a concept broadly useful to the burgeoning area of work in this area to understand and ultimately therapeutically target biomolecular condensates and their constituents.

Impact:

IDRs comprise a large percentage of the human proteome and are particularly important for nuclear proteins that govern our genomic architecture and gene expression. Their disruption is frequent in cancer. This study sheds light on the sequence-specific contributions of IDRs to the highly disease-relevant mSWI/SNF (BAF) chromatin remodeling complexes, which have become top therapeutic targets in oncology.

Funding:

Howard Hughes Medical Institute, The Mark Foundation, National Institutes of Health, United States Air Force Office of Scientific Research, St. Jude Research Collaboratives, Fujifilm, and The Wellcome Trust.

Contact:  Cindy Cantrell; cindy_cantrell@dfci.harvard.edu; 781-953-5000

Journal

Cell

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Book describes Sam Bankman-Fried with little attention span or respect for appointments

The former FTX CEO was reportedly invited by Vogue editor-in-chief Anna Wintour to be her special guest at the Met Gala, only to cancel at the last minute….

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October 2, 2023

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The former FTX CEO was reportedly invited by Vogue editor-in-chief Anna Wintour to be her special guest at the Met Gala, only to cancel at the last minute.

Michael Lewis, author of The Big Short, has painted an interesting picture of Sam Bankman-Fried (SBF) in his soon-to-be released book on the former FTX CEO.

In an excerpt of Going Infinite: The Rise and Fall of a New Tycoon published in the Washington Post on Oct. 1, Lewis described several interactions Bankman-Fried had with the media and influential figures prior to the downfall of FTX and his criminal charges in the United States. According to the author, he would frequently play video games in the background of online interviews — his League of Legends exploits are well reported — often giving little attention to people including Vogue editor-in-chief Anna Wintour.

“Sam didn’t want to seem rude,” said Lewis on SBF’s talk with Wintour. “It was just that he needed to be playing this other game at the same time as whatever game he had going in real life. His new social role as the world’s most interesting new child billionaire required him to do all kinds of dumb stuff. He needed something, other than what he was expected to be thinking about, to occupy his mind.”

Lewis added that Natalie Tien, who moved into the role of FTX’s head of public relations and SBF’s “personal scheduler”, said the former CEO cancelled many highly publicized appearances — often at the last minute — for seemingly no reason at all. The Wintour interview reportedly led to FTX's sponsorship and Bankman-Fried as a special guest at the Met Gala, which he ended up snubbing.

“Sam treated everything on his schedule as optional,” said the book. “The schedule was less a plan than a theory. When people asked Sam for his time, they assumed they’d posed a yes or no question [...] All he had done, when he said yes, was to assign some non-zero probability to the proposed use of his time. The dial would swing wildly as he calculated and recalculated the expected value of each commitment, right up until the moment he honored it or didn’t.”

Other in-person showings by Bankman-Fried included testifying before the U.S. House Financial Services Committee in December 2021 and meeting with Senator Mitch McConnell. The appearances marked some of the rare times SBF appeared in public wearing a suit as opposed to his usual T-shirt and shorts — though social media users pointed to footage of the then CEO's shoes slipped on without being tied at the hearing.

Related: Sam Bankman-Fried FTX trial — 5 things you need to know

It’s unclear what other information will become available once the book is released on Oct. 3, the same day jury selection begins for SBF’s criminal trial in New York. Amid the expected court proceedings, a slew of podcasts, news features, books, and other media have been released detailing aspects of Bankman-Fried’s life before and after the downfall of FTX. A 60 Minutes interview with Lewis revealed SBF had plans to pay off former U.S. President Donald Trump not to run for the office again based on the threat to elections and democracy as a whole.

On Oct. 4, Bankman-Fried will appear in a New York courtroom for the first day of his trial, scheduled to run through November. He will face 7 charges related to fraud at FTX and Alameda Research, for which he has pleaded not guilty.

Magazine: Can you trust crypto exchanges after the collapse of FTX?

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