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Equity futures climb.

US equity futures climb, signaling another attempt by the S&P 500 to end a losing streak that stretched to five sessions. The index is on pace for a 1.7% drop since Friday.

Asian stocks bucked the dour global mood that dragged US shares lower, with gains in South Korea, Australia and Hong Kong. US equity futures also rose. Chinese stocks fell, while the nation’s 10-year government bond yield slipped below 1.6% for the first time.

The US banking system’s reserves, a key factor in the Federal Reserve’s decision to keep shrinking its balance sheet, tumbled below $3 trillion to the lowest since October 2020. Bank reserves fell by about $326 billion in the week through Jan. 1 to $2.89 trillion, according to Fed data.

US stocks extended a selloff for a fifth day. Tesla’s post-Christmas slump swelled to nearly 20% after its annual vehicle sales dropped, dragging on the indexes. The Cboe Volatility Index climbed for the fourth time in five days. Treasury yields steadied following a choppy session.

Multistrategy funds of all sizes produced mostly double-digit gains in 2024, in what was generally an upbeat year for the hedge fund industry. Citadel invited clients to cash out profits after a roughly 15% gain in its flagship strategy, but the vast majority opted to stay put.

Treasury wins back key role in 'eventual release' of Fannie, Freddie

The agencies that control mortgage giants Fannie Mae and Freddie Mac set out a roadmap for releasing the pair from government supervision, reinstating the US Treasury’s power to approve any such plan in a bid to keep the process “orderly.” “The agreement restores Treasury’s previous right to consent to a release of the GSEs from conservatorship,” the Treasury Department and Federal Housing Finance Agency said Thursday in a joint statement. Fannie and Freddie are known as government-sponsored enterprises, or GSEs. (Bloomberg Politics | Jan 2)

Record share of OTC trades eschews interdealer, CCP channels

A record share of over-the-counter derivatives notional sat outside the interdealer or centrally cleared spaces at the end of June 2024, reducing regulators’ visibility in the market at a time of persisting volatility. Of the record $727.1 trillion notional amount held by dealers in Bank for International Settlements member countries, 26.2% had a counterparty other than another reporting dealer or a central counterparty (CCP) – the highest proportion in eight years’ worth of data. (Risk | Jan 2)

Crypto's $205 billion stablecoin market set to go mainstream

While Bitcoin’s surge above $100,000 captivated the headlines in 2024, many financial firms were more focused this year on a different type of cryptocurrency whose price is never meant to rise — or fall, for that matter. Mainstream players such as Visa, PayPal Holdings Inc., Stripe Inc., and others are investing in projects involving stablecoins, which are crypto tokens typically designed to be pegged to the value of the US dollar or another traditional currency. (Bloomberg Crypto | Dec 31)

The battered bond market starts 2025 facing some difficult issues about debt

As if the bond rout in 2024 wasn’t bad enough, fixed income investors face multiple challenges in the year ahead, including one under-the-radar worry about short-term notes coming due. Nearly $3 trillion of US debt is expected to hit maturity in 2025, much of it of a short-term nature that the Treasury Department has been issuing in large amounts over the past few years. (CNBC | Jan 1)

Credit spreads haven't looked this good since the 2000s. Can they get better?

Companies took advantage of favorable financing conditions this year to issue debt at levels not seen since the pandemic, adding cash to the balance sheet to pay for future refinancing needs and other projects. Underpinning the surge in debt issuance: credit spreads, a metric that finance chiefs watch when deciding when to pull the trigger on a bond sale. That metric — the additional amount that companies pay above a Treasury of a similar maturity — tightened throughout 2024, ending the year at levels not seen since at least the mid-2000s. (The Wall Street Journal | Dec 29)

Tokenization has become Wall Street's latest favorite crypto buzzword

Bitcoin’s record-breaking rally is rekindling hope that the digital-ledger technology that underpins cryptocurrencies will revolutionize everything from recording the ownership of houses to bonds. Tokenization, or creating digital representations of real-world assets on a blockchain, has become one of this year’s buzzwords in both conventional and crypto finance circles. The excitement is reminiscent of the hype of a few years ago surrounding the use of blockchains for everything from tracking lettuce at Walmart to digitizing stocks that proved to be premature. (Bloomberg Markets - Cryptocurrencies | Dec 27)

The US Treasury building in Washington DC. Photo: Samuel Corum | Bloomberg

Computers of senior US Treasury leaders hacked

Chinese state-sponsored hackers allegedly broke into the computers of senior US Treasury Department leaders as part of a recent breach of the agency. According to a US official and another person familiar with the matter, the hackers were able to access unclassified material stored locally on the senior officials’ computers, which were among the laptops and desktops infiltrated. Investigators have so far found roughly 100 government computers that were compromised. The attack though is said to have lacked the stealth of previous cyber espionage campaigns blamed on China (all of which Beijing denied), including a recent one tar geting US telecommunications companies. Rather, the hackers appear to have opportunistically taken what was available to them.

— Bloomberg Technology | Cybersecurity

AI needs so much power, it's making yours worse

AI data centers are multiplying across the US and sucking up huge amounts of power. New evidence shows they may also be distorting the normal flow of electricity for millions of Americans. This map shows readings from about 770,000 home sensors, with red zones indicating areas with the most distorted power. more than three-quarters of highly-distorted power readings across the country are within 50 miles of significant data center activity. While many facilities are popping up near major US cities and adding stress to already fragile grids, this trend holds true in rural areas as well.

— Bloomberg Technology

Cyber investors expect more mergers in 2025

Investors and bankers don’t expect a surge of stock listings from cybersecurity companies in 2025, but they say the sector is primed for mergers and acquisitions as the largest vendors expand. The cybersecurity industry is in flux, as providers experiment with new strategies to bundle more services into their offerings and startup funding remains unsteady, giving founders and chief executives a challenging environment in which to raise money and giving larger firms an impetus to acquire smaller ones.

— The Wall Street Journal

Illustration: Virginia Gabrielli

‘New Year, New You’ doesn't work. Here's how you can actually improve your life

Instead of resolving to become a different person in 2025, try setting achievable goals and embracing ‘radical doability.’ On the one hand, January 1 feels pregnant with the potential for a fresh start, a reboot, a decisive repudiation of all the botched efforts and missteps of the past. On the other hand, if any of that really worked, there would be far fewer people in the market for a new beginning, year after year.

— The Wall Street Journal

The ones who need little sleep

Short sleepers cruise by on four to six hours a night and don’t seem to suffer ill effects. Turns out they’re genetically built to require less sleep than the rest of us. Everyone has heard that it’s vital to get seven to nine hours of sleep a night, a recommendation repeated so often it has become gospel. But in recent years, scientists have discovered a rare breed who consistently get little shut-eye and are no worse for wear.

— Knowable

Tracking Putin's most fear secret agency — from inside a Russian prison and beyond

The spy unit that arrested a Wall Street Journal reporter is leading the biggest campaign of internal repression since the Stalin era. The Department for Counterintelligence Operations, known as DKRO, is at the very core of Russian President Vladimir Putin’s opaque wartime regime. The story of how it got there reveals much about how Russia’s autocratic system became entangled in a broiling conflict with the West.

— The Wall Street Journal