“The United States of America Is Never Going to Default”

Daily Updates:

• The S&P 500 ended its last trading session for May almost flat after a slew of headlines and data releases on Friday. However, May marked the index's best month since November 2023, and its best May since 1990 (up more than 6%). 
• At a Pennsylvania rally on Friday, President Trump declared he would double tariffs on US imports of steel from 25% to 50%. He also lashed out in China via his Truth Social platform arguing that President Xi Jinping had “violated” the terms of the US-China detente. 
• US equities were still able to recover from a more than 1% drop intraday as Trump later said “I'm sure that I'll speak to President Xi, and hopefully we'll work that out”. 
• Amidst the tariff fragility, the Fed’s preferred inflation gauge, PCE inflation, showed signs of cooling. The core PCE price index rose 2.5% on an annualised basis in April — its lowest level since March 2021. While the decline in core PCE was in line with economist’s expectations, the headline YoY PCE figure came in cooler than expected at a rate of 2.1% against a forecasted 2.2% and 2.3% in March. 
• Following the inflation release, San Francisco Fed President Mary Daly told Fox Business that the number was a “good relief for American consumers", but it was “an incomplete picture of what we have to look at as policymakers”. Daly added that she’s still “comfortable with the Summary of Economic projections, which we put up in December and in March, that said two rate cuts seem like a good forecast”. 

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• Other pieces of data parsed by the market included a decline in consumer spending and the largest decline in goods imports on record in April. Inflation adjusted personal spending advanced by 0.1% in the month of April, a far smaller increase compared to the 0.7% gain in the previous month. US goods imports in April also fell by 20% compared to a month earlier.
• BTC has spent the weekend mostly trading sideways at $105K, down 4% over the past 7 days. The volatility implied by 7-day at-the-money BTC options is now once again close to its 19 month lower bound of 35%. That drop in volatility expectations over the short-term is also accompanied by a negative put-call skew of -2%, implying traders are pricing a volatility premium for 25-delta OTM puts relative to OTM calls. 
• ETH skew, which had temporarily maintained its bullish outlook while short-tenor skew for BTC turned negative, has followed suit — the put-call skew for 7- and 14-day options are both now tilted towards OTM puts, though remain bullish on a longer outlook. 

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• BTC and ETH Spot ETF flows have recently diverged from one another. The last two trading days of May were marked by outflows to the BTC ETFs of $346.8M and $616.1M. That brought the end of a streak of positive inflows that began May 14. Comparatively, ETH Spot ETF products have maintained their streak of positive net flows since May 16, even recording their daily highest inflow since December 2024 on May 22, 2025 of $110.5M. 
• Speaking on CBS’s Face the Nation program over the weekend, Treasury Secretary Scott Bessent claimed “the United States of America is never going to default, that is never going to happen”. Bessent defended the administration’s goals of reducing the US fiscal deficit stating that the “goal is to bring it down over the next four years”, even if it is brought “down slowly”. According to the Tax Foundation however, President Trump’s “big, beautiful tax bill”  will increase the US budget deficit by $2.6T from 2025 to 2034.
• Bessent also dismissed concerns from a recent comment made by JP Morgan CEO Jamie Dimon who claimed that “you are going to see a crack in the bond market”. 

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• According to Bloomberg, TLGY, a special purpose acquisition company (SPAC), plans to create its own strategic treasury reserve with Ethena’s ENA token – the fourth largest US dollar based stablecoin by market cap.
  
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• Japanese investment firm Metaplanet is now the eighth-largest corporate Bitcoin holder globally after purchasing a further 1,088 Bitcoin, averaging $108,400 per coin. This purchase brings its total holdings to 8,888 BTC.
  

• TRON has surpassed Cardano (ADA) in market capitalisation, reaching approximately $25.6B and securing the position of the 9th largest cryptocurrency. ADA now ranks 10th with a market cap of around $24.1B.

This Week’s Calendar:

Charts of the Day:

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