Analyzing Market Volatility

BR is Bullish on Resi Credit: The U.S. residential mortgage market is $14T. When a mortgage is out-of-the-money, the loan trades below par and the prepayment rate is ~3% CPR which means only 3% pre-pay per annum (i.e., owner moves, extra cash flow, death), a low prepayment rate. When mortgage rate fall, homeowner who are in-the-money by 75bs are likely to refinance, CPR jumps to 20%+ given homeowners seek to lower their monthly payment. It’s wonderful news for homeowners, but for those who own premium coupon MBS they are subject to negative convexity. Convexity measures the sensitivity of a bond's price to changes in interest rates. Bonds with positive convexity benefit commensurately to a decline in rates as future cash flows are discounted at a lower rate, making them more valuable. MBS on the other hand have negative convex when the price approaches par as the investment doesn't increase as much from this inflection point due to prepayment risk rising as the bondholder loses the opportunity to earn the higher interest payments and then must reinvest at lower rates. The bar chart below shows the rate distribution for the mortgage universe. As the mortgage rate is now 6.1%, mortgages >6.5% are highly susceptible to early pre-payment. MBS between 5% - 6%, might see prepayments inch up marginally from 3% CPR to 4% as these slightly out-of-the-money homeowners who have felt trapped, now have more flexibility to move since the cost to do so is marginalized. Note that in the U.S., 30-year fixed rate mortgages are priced at spread to 10-year UST (not SOFR or Fed Funds); I expect the 10-year UST rates will decline less than the front end of the curve as the yield curve steepens as the Fed cuts rates. New home sales will benefit in this lower rate environment as will existing homes sales. Be Bullish: lower mortgage rates are net-positive for homeowners/residential credit, home builders, building materials, and mortgage originators.

The last three weeks serve as a timely reminder that it is too soon to relax about gas supply security in Europe. Storage withdrawals have risen above 5 bcm since the start of November as cold weather & below-average wind output have pushed gas demand higher.    As a result, EU gas storage fill levels dropped below 90% this week – with inventories now 8 bcm below their level at this time last year. With markets tight, maintaining ample gas storage for later this winter will be important to mitigate risks, especially given the potential halt to Russian gas transit via Ukraine in January. Immediate measures available to Europe include encouraging households to save energy where they can, and attracting new LNG and pipe supply where possible. After that, a new wave of LNG supply on the horizon is set to start easing underlying market balances in the second half of this decade. And Europe can reduce its vulnerability to market volatility by doubling down on homegrown clean energy sources and efficiency measures, and by investing in stronger electricity grids and storage infrastructure.

The Bond Market’s Hidden Signals: What the Economic Surprise Index Tells Us Want to know where Treasury yields are headed? The Economic Surprise Index holds the answer. This index tracks how economic data compares to market expectations. When the data beats expectations, the index rises. When it falls short, the index dips. Here’s the key: Treasury yields, like the 2-year (2Y) and 10-year (10Y), tend to follow the index. But with a two-month delay. What Does the Chart Show? The Economic Surprise Index predicts yield movements. Big swings in the index drive similar shifts in yields. Treasury rates react, but only after a lag. What’s Happening Now? As of late November, the index suggests yields may have peaked. But future movements depend on key factors: Policy Changes: Immigration reforms and trade policies could reshape inflation and growth. Tax Cuts: New tax policies may boost spending, raising inflation risks. Inflation: Persistently high inflation could lead the Fed to keep rates elevated. Why It Matters Stronger-than-expected data pushes yields higher. Weaker data pulls them lower. For investors, the Economic Surprise Index is a critical signal. It helps predict shifts in bond prices and overall market trends. Takeaway The bond market responds to surprises. The Economic Surprise Index shows how unexpected data impacts yields. Understanding this connection can help you spot opportunities—and manage risks. #FixedIncome #BondMarket #InterestRates #EconomicTrends #Investing

This evening in ERCOT is tight. In anticipation of the inevitable finger-pointing and misrepresentations of what is causing it, here are some facts. Thermal outages at this moment are 10 GW. That's at the 'extreme' level under the SARA report. Notwithstanding that this late September, load is very, very high. Especially for a Sunday. HE19 and HE 20 (from 6 pm to 8 pm), in the chart just pulled from the ERCOT website, is showing a ~4-4.5 GW load miss in the chart below. This means that system load for today (forecast by ERCOT) is turning out to be ~4-4.5 GW HIGHER than they had forecast, a mere ~24 hours earlier. Oops? Additional load of 4.5 GW in an hour that was forecast to be 68 GW is almost 7% error. That's very poor forecasting. Why does this matter? If system conditions change this rapidly due to forecast errors of this magnitude, who fills in the gap? Some enterprising energy storage and fast-ramping gas plant operators might be lying in wait in realtime energy, having had proprietary algorithms that predicted this miss and the resulting very high prices that are materializing. But when forecast misses are this large, the ancillary markets are available at a moment's notice to be deployed if the realtime energy markets are insufficient. What we are watching today (massive forecasting misses) is literally the exact reason to have ancillary markets, and we will likely see deployment of multiple ancillary products if the load doesn't miraculously drop to what ERCOT had previously forecast yesterday. There are MANY factors and variables at play in how markets play out daily and there can be many surprises. So for today, what are the causes for the high prices and use of ancillary market products to keep the system intact? 1) Load far higher than predicted (2-4 GW higher depending on hour) 2) Thermal outages hitting 'extreme' levels for this time of year (4 GW higher than expected) 3) Wind lower than expected for these hours (1.5 GW lower) Add that up. What is the biggest contributor? Answer: It isn't the wind. Meanwhile, for those of you following along the current ancillary markets sizing process in ERCOT, there was a lot of debate last week on the sizing of ancillary products during some of the highest-risk hours, like 6-8 pm. The methodology being proposed by ERCOT would reduce volumes in those hours because those hours are now so 'predictable' based on the data from the previous two years. Today has just showed two critical points: 1) That these evening hours are not as predictable as ERCOT has suggested as recently as two days ago, and that reducing ancillary procurement in these hours will create more operating risk on the system. 2) Of the multitude of factors that lead to scarcity and high prices, high load and thermal outages are at least as large of a contributor as anything else. IMM take note. #ERCOT #energystorage #ancillarymarkets #loadgrowth

Bull Market Money Flow: BTC pumped, memecoins pumped and altcoins were left behind But the data shows that an altseason is still possible Here's a full update on the current money flows: -- Before I begin, BTC has crashed and the timeline is full of FUD. All while; -The SEC removes lawsuits against crypto companies -Bybit recovered losses after a $1.5B hack -More institutions are buying BTC than ever before This means crypto is still bullish long-term. -- The catch is: New money is only flowing into Bitcoin, major altcoins, and utility-based projects. This means that non-utility (like memecoins) has a much less likelihood of future returns. Here's a chart that confirms this trend and shift in money flow for the last 3 months: (See image 1) -- 2. Outflows >> Inflows The increase in outflows from Solana in the last 30 days also confirms the shift in money flow from memecoins to DeFi. This means the next major runs will be in DeFi once BTC starts to reverse again. (See image 2) -- BTC still hasn't broken any major structural levels, so there is still a chance of a deviation to the upside. If BTC starts to claim above $90K, there is a high likelihood that the market will reverse with a major inflow of capital into altcoins. (See image 3) -- 3. DeFi and Majors When BTC starts to reverse upward, pick a niche and start creating a watchlist of projects showing the most strength in these times. These will pump the hardest when the money flows back into altcoins. Example: Litecoin strength VS Solana strength (See image 4) -- 4. Market Cap hierarchy Once you've selected your niche use this hierarchy to manage capital rotations: -First inflows: Major Coins -Second inflows: Medium-caps -Last inflows: Low-caps Reset. This helps you rotate your attention to the most profitable assets. (See image 5) -- 5. Outflow Tracking Lastly, watching outflow data can help you pre-determine where the capital is shifting next. For example: The outflows from Solana were highest between December and January. This meant that memecoin trends would weaken since SOL was being used for memes. (See image 6) -- After new sectors start increasing in outflows, money flows back into BTC or Stablecoins. When this happens, shift focus away from altcoins and reset. The major trends and trades will happen on BTC again. Use the Bitcoin Dominance to determine when this shift happens early. Remember, The more the cycle matures, the harder it will be to predict any new changes. But with a clear framework like this, you can increase your probability of success and beat the majority of the market. You still have time to use the data to your advantage. -- If you liked this post and want to learn more about becoming a profitable trader... Follow me → Koroush Khaneghah

🔥 India’s power sector is at a tipping point, and the Short-Term National Resource Adequacy Plan (ST-NRAP) 2025-26 by Grid Controller of India Limited reveals the stakes. 📊 With peak demand projected at 273 GW in June 2025, the grid will be tested. Renewables will play a critical role—88.2 GW solar, 30 GW wind—but grid constraints and supply shortages could drive major market swings. ⚠ I have taken shot a envisaging #PowerExchange Price Trends to Watch in 2025-26 🔺 Summer evenings (April-October): ₹10-12/kWh, as grid stress peaks and gas-based generation (~36,188 MUs) sets the marginal price. 🔻 Winter relief: ₹4.5-6/kWh, as #demand dips to 135 GW, with storage (3,998 MW BESS, 7,485 MW #PSP) balancing fluctuations. ☀ Daytime #solar hours: ₹3-5/kWh, but curtailment risks (5-10%) remain, especially in Rajasthan & Tamil Nadu. 🔍 Why These Swings? ✅ A 12.1% chance of load loss (LOLP) in May-June, with shortfalls of 7-8 GW. ✅ Transmission bottlenecks threaten ₹2,000 crore annual curtailment losses. ✅ If LNG prices exceed $12-14/MMBtu, power prices could spike further. 💡 How do we fix this? 🚀 Flexible #storage (BESS/PSP) & smarter outage planning could stabilize markets. ⚡ #Transmission expansions are critical to avoiding forced RE #curtailments & price volatility. 📢 For consumers: expect cheaper days, costlier nights. 📢 For #utilities: a call to optimize real-time dispatch & market participation. ⚠ Disclaimer: This assessment is based on ST-NRAP’s projected demand-supply balance, historical trends, and market assumptions. Actual market prices will depend on real-time factors, including demand shifts, generation availability, LNG pricing, and unforeseen grid events. This post is intended for discussion purposes only and should not be considered financial, regulatory, or investment advice. All views are personal, and pricing figures are tentative 💬 Will India’s power market navigate these risks smoothly? Drop your thoughts below! 👇 #PowerMarket #ISTS #BatteryStorage #ElectricityPricing #IndiaEnergy #ExchangeMarkets #STNRAP #EnergyForecast

Finland and Baltics are seeing exceptional day-ahead prices tomorrow as residual load is about 1 GW higher, due to lower renewable generation. Demand is extremely high these days, across the Nordics as record breaking cold sweeps across the area. What is driving the prices tomorrow for this area? Energy Quantified by Montel is showing lower CCGT availability, combined with an increase in residual load (not shown, wind forecast is lower than today). On the EnAppSys - Energy Insight platform, we can see that sentiment is bullish, likely driven by extreme balancing prices, the intraday market today is trading upward significantly. In the sensitivity analysis of the day ahead market we can see much higher price sensitivity, this indicated much steeper supply/demand curves. A small change in demand or supply has a big impact on prices. So, imagine the 1 GW change in residual load on a 12-14 GW market such as Finland. This massive shift has resulted in pretty extreme pricing.

Flexibility season is upon us, and price volatility in balancing markets for continental Europe demonstrates the urgent need for grid solutions, all around the world. On March 26, 2025, imbalance prices surged to €1,895 and €1,900 per MWh, triggered by errors in the solar production forecast that strained grids. This volatility highlights the critical need for adaptable energy solutions. EPRI is stepping up with the Mercury initiative (https://lnkd.in/erPxupHR) driving adoption of tools like batteries and smart thermostats to balance energy fluctuations. Alongside it, DCFlex (https://lnkd.in/eqAdgsiA) taps into the growing number of data centers—significant power users—as dynamic resources to steady the grid during peak loads and/or generation shortages that result in significant electricity price swings. EPRI is contributing our extensive research insights on flexibility to the Expert Group within Europe’s EU Agency for the Cooperation of Energy Regulators (ACER) (https://lnkd.in/ey-M_GaJ) to guide European flexibility needs assessment. These efforts are shaping a stronger, more flexible energy future.   How do you envision grid flexibility evolving? Check out Michel Verschuere and Yuso for more background. Let’s hear your thoughts in comments!  #gridflexibility

Some excitement on this cold January evening, with very tight supply margins expected in GB as wind output drops well below normal alongside sub-zero temperatures. NESO issued an Electricity Capacity Market Notice especially for this evening although this was cancelled earlier. Residual load is forecast at a peak of nearly 50 GW and interesting that historically, day-ahead spot prices tend to hit above £250/MWh at this level, although they escalated to much higher levels during the energy crisis in 2022 due to stronger gas prices and thus SRMC. Meanwhile, there’s been a strong balancing response with the system buy/sell price spiking to £2900/MWh for 15:00 delivery onwards, a level not seen since 2022! Short-term markets could face more volatility given the poor wind and cold weather outlook - we currently forecast residual load reaching above 47 GW on Friday evening. #Volue #powermarkets #trading #gb

I've often been asked how to evaluate listed cryptocurrencies, so I decided to write a comprehensive guide for beginners and the crypto-curious. Understanding when to buy an asset, especially in the dynamic world of cryptocurrencies, is crucial for making sound investment decisions. ✨ 🔍 Fundamental Analysis in Crypto: This method, borrowed from traditional stock analysis, is essential for assessing a project's intrinsic value and risks. With the crypto market's volatility and hype, fundamental analysis helps distinguish valuable projects from those driven by speculation. 📊 Key Aspects of Crypto Fundamental Analysis: - Development Team: Evaluate the team’s background and track record. - Technology & Blockchain: Assess the underlying technology's robustness and utility. - Token Utility & Roadmap: Understand the token’s use cases and long-term value creation. - Tokenomics & Distribution: Examine the token’s demand and supply model and distribution plan. - Partnerships & Ecosystem: Look for strategic alliances and active community engagement. - Security & Code Audit: Check for reputable third-party audits and security measures. - Regulatory Compliance: Ensure adherence to relevant regulations. - Market Metrics: Analyze market cap, trading volume, and supply metrics to gauge valuation and potential risks. - Price History: Review historical price trends to identify long-term patterns and avoid pump-and-dump schemes. 📚 Read the full article to delve deeper into these aspects and enhance your crypto investment strategy! Happy investing! 💼💡 #Cryptocurrency #CryptoInvesting #FundamentalAnalysis #Blockchain #CryptoForBeginners #InvestmentStrategy #Ethereum