Derivatives markets remain positive

Daily Updates:

• According to Bloomberg, Japan’s Finance Ministry reportedly sent out a questionnaire to market participants, such as primary dealers and bond buyers, to gauge their views on the appropriate amount of Japanese government bonds issuance. 
• The move is an indication of Japan attempting to stabilise its bond markets following a deep selloff which has pushed the 10Y, 30Y and 40Y yields to decade highs and after a recent auction of a 20Y government bond (JGB) saw the weakest demand since 2012.
• The yield on the 20-year Japanese bond fell by over 19 basis points to 2.34% following news of the questionnaire. 
• US treasuries also rallied after the Bloomberg report, as lower Japanese bond yields reduce competition for dollar-denominated assets.
• The 10Y US treasury yield fell by 5bps to 4.457%, after extending past 4.5% last week.

• Bitcoin traded rangebound between $107K and $110K yesterday as US equity markets were closed for Memorial Day. Despite the sideways price action, the volatility smile skew for the 7-day tenor remains tilted towards OTM call options by more than 5%, though that has dropped off slightly from under 6% over the past 24 hours. 
• Outright implied volatility levels are compressed to each other as long-tenor options carry a 4 vol point premium to short-tenor options, resulting in a relatively flat term structure of implied volatility. 
• As we have seen over the past month, ETH options continue to maintain their volatility premium over BTC options; ETH smile skews are slightly less skewed towards OTM calls relative to BTC calls for options that expire within 30 days, however longer-tenor ETH options show a more bullish outlook. 

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• Yesterday the Financial Times reported that the Trump family media company had plans to raise $3B ($2B through equity and $1B via a convertible bond) to buy cryptocurrencies such as Bitcoin.
• Trump Media Group have since rebuffed the report – responding to the Financial Times in a statement that read “apparently the Financial Times has dumb writers listening to even dumber sources”. 

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• Bancor has initiated legal action against Uniswap, claiming that Uniswap Labs unlawfully replicated its 2017-patented "Constant Product Automated Market Maker" model, a core innovation enabling decentralised trading without intermediaries, by using it in the creation of the Uniswap Protocol.

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• DeFi leveraged yield farming platform, Alpaca Finance is closing on BNB Chain and Fantom after more than four years in operation. The team cited persistent financial losses, user attrition, and stiff competition from newer protocols as key reasons for the shutdown. The recent delisting of its token from Binance further weakened the project’s sustainability.

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• A U.S. judge has dismissed fraud charges against Avraham Eisenberg, who exploited Mango Markets for $110 million in 2022, ruling the case was filed in the wrong jurisdiction. The court found no ties between Eisenberg’s actions and New York, and noted Mango’s lack of defined rules made the conduct legally ambiguous. This decision marks a legal victory for the DeFi trader in this market manipulation case.

This Week’s Calendar:

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Charts of the Day: