Crypto Catches Fire as Trading Volumes Surge — Market Talk

1203 ET - Major cryptocurrencies are posting big gains, driven in part by major surges in the amount of trading volumes over the past 24 hours. The Treasury Department steps up its buyback operations for government bonds, which in turn sends yields sharply lower. In turn, riskier assets like cryptocurrency are jumping, with bitcoin up 6.1%, ethereum up 9%, and solana up 6.8%. Trading volumes are up big over the past 24 hours, with ethereum practically doubling its trading volume in that time at $49.3 billion, according to data from Coinglass. Bitcoin volume is up 57% to $76.5 billion. Low trading volumes has been considered a factor for sluggish trade in cryptocurrencies in recent months by analysts. ([email protected])1122 ET - Indirect effects of surging energy prices on eurozone core inflation have been close to zero so far, but they are likely to build in the second half of the year, Capital Economics' Jack Allen-Reynolds says in a note. If energy prices remain around their current levels, headline inflation will soon rise to about 3.5% in the next few months, he says, from 2.9% in July. Together with a likely increase in energy inflation in August, food inflation will probably rise too. Meanwhile, the rise in core goods inflation could have further to run, given that ICT-equipment inflation will keep rising on the back of strong global demand for artificial intelligence-related goods, he says. ([email protected])1103 ET - Short-dated quality bonds could benefit if investors scale back their expectations of central bank interest-rate rises in the coming months, UBS Global Wealth Management strategists say in a note. Current market pricing for central bank rate rises looks too aggressive, the strategists say. Markets price in a total of 24 basis points of Fed rate rises in 2026, and a total of 27 bps of BOE rate increases by year end, LSEG data show. If economic data continue to come in weaker than expected, markets could reduce rate-rise expectations, enabling short-term bond yields to fall, they say. ([email protected])1057 ET - The current low water levels of the River Rhine will hurt German manufacturing production in the third and fourth quarters if sustained, Pantheon Macroeconomics' Claus Vistesen says in a note. The gauge at the bottleneck of Kaub reached record lows in August, with vessels potentially forced to carry substantially less cargo. "A prolonged low water level in the Rhine is a negative supply shock to industrial logistics," Vistesen says. Recent data could point to a 6.6% fall in intermediate-goods production--a decent proxy for sensitivity to low water levels--pushing down industrial production by 2.5% over six months, all else being equal, he says. If the heatwave continues, third and fourth-quarter GDP forecasts could get downgrades of between 0.1 and 0.2 percentage points, he says. ([email protected])1046 ET - Credit spreads on European bonds do not reflect the risk some debt issuers face from exposure to drought conditions, Nuveen's Laura Cooper says in a note. Companies with significant exposure to the effects of drought could be more negatively affected than corporates with diversified revenue streams, she says. Third-quarter corporate earnings are likely to reveal the impact of drought. "Companies with diversified generation, alternative logistics or pricing power should be rewarded as earnings separate the resilient from the exposed." ([email protected])1042 ET - Sukuk or Islamic bonds are emerging as an alternative funding source for some African sovereigns, helped by demand from GCC and African Islamic banks and sharia-compliant investment funds, Fitch Ratings says. African sukuk outstanding reached $7 billion in August, up around 16% on year, though issuance remains infrequent and accounts for less than 1% of global sukuk outstanding. Egypt has become a more regular issuer after regulatory reforms and deeper ties with the GCC, while Benin's $500 million sovereign sukuk this year attracted GCC participation and was more than eight times oversubscribed, Fitch says. Structural constraints mean African issuance is likely to remain sporadic over the medium term. ([email protected])1041 ET - Good quality short-dated and medium-dated bonds look appealing given that they have stayed relatively steady amid fiscal and inflation uncertainty, UBS Global Wealth Management's Mark Haefele says in a note. Long-dated government bond yields faced pressure this week. On Tuesday, the U.S. 30-year Treasury yields climbed to a 19-year high of 5.337% and German 30-year Bund yields reached 3.782%, the highest since 2011, Tradeweb data show. Short and medium-maturity bonds offer attractive total returns, Haefele says. ([email protected])1010 ET - A tariff deal between the US and Canada would represent another step toward eventual interest-rate increases from the Bank of Canada, says economist Derek Holt of Bank of Nova Scotia. Holt is among of the few economists predicting rate increases prior to year end. He says his call is partly based on the expectation of a US-Canada trade deal prior to the midterms. "The odds of this happening went up," Holt says, citing President Trump and PM Mark Carney statements on significant progress to date to avoid implementation of a new 50% tariff on certain Canadian goods. A deal, contingent on its details, "would buoy market and business sentiment toward Canada," he adds. ([email protected], @paulvieira)1003 ET - Germany should invest in expanding its transportation infrastructure in light of supply concerns over the low water levels in the River Rhine, Swiss business lobby Economiesuisse's chief economist Rudolf Minsch says. Companies are waiting for transport solutions from governments, with Swtizerland proceeding only slowly, he says. But the situation in particularly acute in Germany. "As in Basel, shallow-water sections in Germany should also be dredged, particularly in the German Kaub area," Minsch says, referring to the pinch point in the Rhine Valley in northwestern Germany. Firms are still waiting for expanded north-south rail capacity in Germany. "This expansion is constantly being delayed, much to the chagrin of the business community and consumers," he says. ([email protected])1001 ET - Gold prices climb 2% amid a weaker U.S. dollar and falling U.S. government bond yields after the Treasury said it would at least double the amount of bonds it buys back. In early U.S. trade, New York gold futures are up 2.1% to $4,516.10 a troy ounce. Markets now await the release of minutes from the Federal Reserve's July policy meeting for more cues on the interest-rate outlook. ([email protected])0948 ET - The U.S. Treasury's plan to increase buybacks of long-dated government debt is positive for bitcoin, Standard Chartered's Geoff Kendrick says in a note. "Bitcoin, a way to store wealth without a central authority, was built to allow investors a way to avoid this type of intervention." Key for bitcoin is to rise above $65,500, he says. Bitcoin has likely reached its cycle low and investors should be positioning for a move to $100,000 by year-end, he says. Bitcoin rises 0.6% to $64,938, LSEG data show. The Treasury said Wednesday it will increase, by at least double, the size of liquidity support buyback operations for securities from the 10-year to 30-year sector. The announcement follows Tuesday's sharp rise in yields. ([email protected])0937 ET - Investors hoping to see bitcoin break out of its current range-bound malaise may have to wait until 2027, says Lacie Zhang of Bitget Wallet in a note. She says bitcoin has posted a minor recovery from multi-year lows below $59,000 in June--but the low spot volume trade for the token suggests that investors remain unconvinced that it has posted a near-term bottom. "Confirmation of a durable bottom still requires sustained volume and less fear," says Zhang. CoinMarketCap's "Fear and Greed Index" crossed into neutral territory over the weekend, and remains at a score of 41 out-of 100. Bitcoin is up 0.4% to $64,830, while ethereum rises 1.3% to $1,937 and XRP is up 1% to $1.01. ([email protected])