What Is LOT

On September 15, the Daily Telegraph reported that the Bank of England is preparing to stop selling long-term government bonds due to rising borrowing costs putting pressure on the Chancellor of the Exchequer. According to the plan, the Bank will cease the sale of 20-year and 30-year UK government bonds that it accumulated during the financial crisis to stabilize the economy. Economists believe that since 2022, the sale of these long-term debts has cost taxpayers £22 billion. This move comes as a global bond sell-off pressures newly appointed Chancellor Jeremy Hunt ahead of his first budget on October 28. Adopting a different approach could give Hunt more room to alleviate the cost of living pressures. Stopping the sale of long-term bonds at a significant loss by the end of this decade, compared to continuing current bond sales, is estimated to save £2.5 billion annually. Although this could save the Chancellor billions, it complicates his efforts to achieve a balanced budget under fiscal rules for day-to-day spending.

On September 15, Wall Street investment bank Bernstein stated that the latest negotiations in the U.S. Senate regarding the CLARITY Act may exceed previous market expectations. The firm believes that the market still carries a bearish sentiment ahead of the procedural vote scheduled for September 15, and any positive outcomes have not yet been fully reflected in the prices of crypto assets and crypto stocks. The Bernstein team noted that the latest draft released by Senate Republicans incorporates 126 substantial amendments proposed by Democrats, addressing issues such as officials' conflicts of interest in crypto assets, the role of state attorneys general in enforcement, a stablecoin reward mechanism, and protections against outflows from community bank deposits. The Treasury Secretary will also gain the authority to implement a stablecoin reward 'circuit breaker' for up to 18 months. Bernstein believes that the White House's concessions on ethical provisions are nearing the upper limit of negotiable space, and some Democratic lawmakers will also be wary of the 'anti-crypto' label before the midterm elections. The firm predicts that the market's probability of the bill advancing this year has risen above 30%, indicating a warming of policy expectations. However, the vote on Tuesday is merely a procedural step to decide whether to initiate debate, requiring 60 votes for support, and does not mean the bill has passed or will take effect immediately. Even if the procedural motion is approved, it will still face amendments, final votes, and coordination with the House of Representatives. Bernstein warns that if the bill encounters obstacles along with a hawkish Federal Reserve decision, the crypto market could experience a significant pullback; conversely, unexpected legislative progress could serve as a short-term catalyst for native crypto assets and crypto stocks.

On September 15, Galaxy CEO Mike Novogratz stated that at least 4 U.S. Republican senators still oppose the Clarity bill. It is important to note that the U.S. Senate requires 60 votes to advance the Clarity bill. The current composition of the 119th Senate is: 53 Republican seats, 45 Democratic seats, and 2 independent senators (who typically vote with the Democrats). Therefore, if the Republican Party cannot form a unified stance, securing bipartisan support from Democrats will significantly increase the difficulty of passing the Clarity bill. Reports indicate that the divisions within the Republican Party mainly focus on concerns that stablecoin yields could impact community bank deposits, the potential 'weaponization' of state attorney general enforcement, or dissatisfaction with developer protection provisions.