Bitcoin Down, Potential Bond Yield Break, Bank of England Holds Rates

Equities held up well with S+P500 and Nasdaq down 1.2% and 1.4%, good considering Microsoft -5%, Amazon -4.4%. The defensive rotation saw 2-year yields fall 9bp and consumer staple inflows jumping to 17 times the 12-week average.

Another wave of margin hike requirements from CME (a third increase in 10 days) raising gold/silver margins to 10%/18% from 8%/15%. Critically for silver it closed below Monday’s swing low. Price action suggests it’s going lower as the relief rally has hit more forced liquidations and deleveraging. (Chart 1, Silver, Bloomberg)

Bond yields fell on the deleveraging as a safe haven play. And despite weaker second tier jobs data, recession calls are vastly exaggerated with Mag7 spending 2.1% of GDP on capex, GDP expectations above 4%, and U.S. govt running +6% deficit (expanding in H1). Which way will 2-year yields break? (Chart 2, US 2-yr bond yield, Bloomberg)

Which way will it break? Hard data suggests higher as the economy still runs strong. (Chart 3, Citibank economic strength indicator vs 2-year yield, Bloomberg)

Challenger job cuts in January more than doubled year-over-year, hitting their highest level since the 2009 Great Recession. Having said that Q1 jobs cuts are typically higher and over 50% of cuts came from just 3 companies Amazon, UPS and DOW. Also weaker, December JOLTS job openings slid to 6.54 million -down from a revised 6.93 million in November - with a "vacancies per unemployed" of 0.9. BUT this is still consistent with a jobless rate of 4.4% and weekly jobless claims, despite rising, remain historically low. The data though does show a continued decoupling of employment from economic growth. The AI productivity reset.

Leveraged ETFs were forced to sell ~$18 billion of U.S. equities in a single day to rebalance exposures, marking one of the top 10 largest forced-selling events on record.

U.S. Embassy warns citizens to "leave Iran now."

Circuit breakers (called sidecars?!?!) in the Korean Kospi Index, -5% amid the global tech sell-off.

The Bank of England held rates at 3.75% in a narrow 5-4 vote with a dovish outlook. In particular, 2026 growth forecast is revised down to 0.9% (so slower than last year's estimated 1.4%), and unemployment is revised up (for every year from 2026 to 2028)

ECB also remained on hold. But with soft inflation data on Wednesday the OIS should price further easing, sell EURUSD.  Eurozone core inflation Annual core inflation cooled to 2.2% in January, marking its lowest level in over four years. Headline inflation dropped further to 1.7%, below the ECB’s 2% target.

The WTI Crude Oil ETF, posted +$217 million in inflows on Tuesday, the largest daily intake since the 2020 pandemic. This is also the 2nd-highest inflow on record and DOUBLES any other daily high seen over the last 5 years.

The average cost to mine a single Bitcoin is now over $87,000. Everyone mining Bitcoin now is losing money.

U.S. hedge funds have cut software stocks’ share of net exposure to just 4%, the lowest level on record.

UK - The Times reports HMRC data shows there is now more people over 70s paying income tax than the under 30s.

Michael Saylor's MSTR Strategy is now down 80% from all-time highs, and the 2x leveraged MSTR ETF is now down -96.6%.

308,399 crypto traders have been liquidated over the past 24 hours.

Data today – Canadian employment, US Michigan consumer confidence (No US payrolls due to govt partial shutdown).