Bitcoin Edges Lower Ahead of Major Options Expiry — Market Talk

0725 GMT - Bitcoin falls slightly, staying within a narrow range as investors look ahead to a major quarterly options expiry on Friday. Open interest stands at $40 billion and 38% of these contracts will expire on Friday, CoinDesk reports. The strike price that would cause losses for the largest number of options holders at expiration is $102,000. That suggests a pull towards this level. The Wall Street Journal reported that bitcoin mining group Core Scientific could soon be acquired by AI company CoreWeave. On the geopolitical front, the cease-fire in the Israel-Iran conflict continues to hold but the situation remains uncertain. Bitcoin falls 0.4% to $107,379, according to LSEG. ([email protected])0646 GMT - China's retail sales growth could moderate to 4.5%-5.0% in 2H after a strong 5.8% rise in April-May, Barclays's China economists say in a note. They attribute this to fading effects of front-loading, and a smaller subsidy of CNY138 billion for the consumer goods trade-in program in 2H compared with CNY162 billion in 1H. A continued decline in home prices and an uneven recovery in equity markets still pressure households' wealth, they say in a note. However, should there be a sharp reversal in retail sales momentum, the economists expect the government to step-up efforts to support consumption with either an enlarged consumer goods trade-in program or expand the subsidy to include more services sectors. ([email protected])0641 GMT - The dollar recovers slightly on easing concerns over the global trade war. U.S. Commerce Secretary Howard Lutnick said the U.S. has reached a trade agreement with China and that deals with 10 more trading partners were imminent. Meanwhile, the EU said it's ready for a trade deal with the U.S. The more upbeat trade news soothes worries about slowing U.S. economic growth. This provides some support to the dollar after it reached a three-year low against a basket of currencies Thursday following a Wall Street Journal report that President Trump was considering selecting a replacement for Federal Reserve Chair Jerome Powell early. The DXY dollar rises 0.2% to 97.313, having reached a low of 96.997 Thursday.([email protected])0630 GMT - Europe is enduring above average levels of corporate distress and this is unusual, Andrew Wilkinson, a partner in Weil, Gotshal and Manges' European Restructuring team, says. Compared with cycles in the past, the current levels have been maintained since the middle of 2022 when the pandemic rescue efforts started wearing off. While there are several contributing factors, the underlying reality is there is no growth in Europe and this erodes confidence. There doesn't seem to be any sign of corparate distress abating as there is no obvious reason for sectors such as retail and consumer, industrials and real estate to become a lot less distressed, he says. Wilkinson highlights the latest Weil European Distress Index which draws on data from 3,750 listed companies. ([email protected])0625 GMT - The positive risk backdrop is supportive for further government bond yield spread tightening in the eurozone, says Commerzbank Research's Hauke Siemssen in a note. In particular, the 10-year Italian BTP-German Bund yield spread could narrow further, after hitting a multi-year low of 88 basis points on Thursday, the rates strategist says. "We see potential for further tightening over the summer," he says. The 10-year BTP-Bund yield spread continues to trade at this level, according to Tradeweb data.([email protected])0615 GMT - The term premium--additional yield investors demand to hold a longer-dated bond rather than a shorter-dated one--in 10-year German Bunds is expected to rebuild by roughly 35 basis points per year, Societe Generale rates strategists say in a note. Their calculation is based on a model that combines rates volatility, Germany's budget and funding prospects, the European Central Bank's quantitative tightening, as well as assumptions on additional foreign demand for eurozone bonds. "Our model...suggests that the Bund 10-year term premium will continue to rebuild by roughly 35bp per year," they say. The 10-year Bund yield falls 0.7 bp to last trade at 2.558%, according to Tradeweb data. ([email protected])0605 GMT - U.S. Treasury yields should remain in the 4.0%-4.5% range in the second half of the year, with two interest-rate cuts by the Federal Reserve likely, say Societe Generale's rates strategists. "We expect the Fed to cut rates twice in 2H 2025 to counter the slowdown in growth and employment," they say in a note. They expect a modest increase in U.S. Treasury term premia, the rise in long-end yields is likely capped and hence the steepening momentum is likely to wane, they say. The strategists see the U.S. economy remaining resilient despite high uncertainty on tariffs, fiscal policy and geopolitics. The 10-year Treasury yield last traded broadly flat at 4.252%, according to LSEG. ([email protected])0555 GMT - The U.S. Treasury curve is flattening slightly in Asian trading hours, as short-end yields rise while long-end yields are largely flat, according to LSEG data. Thursday's curve steepening is thus reversed. The previous day's steepening was triggered by weaker-than-expected 1Q GDP data, Federal Reserve officials' speeches indicating forthcoming easing of monetary policy despite the potential impact from tariffs, says Danske Bank Research's Kirstine Kundby-Nielsen. "On top of this there is the ongoing speculation that Trump will name a successor for [Fed Chair] Powell already in the autumn to put pressure on Federal Reserve to ease monetary policy," the analyst says. The two-year yield is up 3bps at 3.743%; the 10-year yield is flat at 4.255%; the 10-year 30-year yield is down 1 basis point at 4.806%. ([email protected])0528 GMT - ​Debt is not a pressing concern for most eurozone countries, the Nordics, Australia, New Zealand and Switzerland, Pimco's Peder Beck-Friis​ says in a note. These countries have debt levels that are too low to threaten fiscal credibility, the economist says. A few countries, like the U.K. and Italy, face a more fragile outlook, but their debt looks broadly sustainable if they follow through on planned fiscal tightening​, he says. Meanwhile, Japan's debt remains very high but is unlikely to rise much; Japan still borrows at low interest rates relative to GDP growth, making its debt easier to manage, he says. ([email protected])0527 GMT - ​The U.S., France and Belgium stand out among developed market countries with their debt on an ever-increasing path under current policies, Pimco's Peder Beck-Friis​ says in a note. These countries run large primary deficits​--ignoring interest costs--and borrow at interest rates at or just above their normal growth rates, compounding the cost of servicing those deficits.​ the economist says. "And none plans to tighten policy meaningfully soon​," he says. ([email protected])0506 GMT - EUR/USD's upward momentum has improved, based on the daily chart, Quek Ser Leang of UOB's Global Economics & Markets Research says. The currency pair staged a sudden surge this week, with the high so far at 1.1744, the senior technical strategist says in a research report. Further EUR/USD strength isn't ruled out. However, a sustained advance would require a break above 1.1780, the strategist says. The 1.1780 level marks the top of what seems to be an ascending channel formation. If EUR/USD breaks clearly above 1.1780, focus would shift to 1.1900 and then to 1.2000, the strategist adds. EUR/USD is 0.1% lower at 1.1690. ([email protected])0301 GMT - Among Asia ex-Japan currencies, the Taiwan dollar, Korean won, and Malaysian ringgit have scope to outperform, two members of OCBC's Global Markets Research & Strategy say in a research report. For TWD, ongoing demand from Taiwanese exporters and financial institutions to hedge USD exposure should be supportive of the currency, the members say. For KRW, South Korea's presidential election results have paved the way for greater political stability and the government focuses on delivering fiscal stimulus to support growth. For MYR, there are domestic factors such as robust FDI inflows, and external factors such as soft USD trend, the members add. ([email protected])