Escalation, Not Resolution

Peace talks have collapsed. Trump has issued a blockade deadline for Iranian ports and WTI is back above $100. Hungary has voted out Orban in a historic landslide. Last week's data was broadly cold with the exception of inflation expectations, which continue to tick higher. Bitcoin is holding above $70k despite the geopolitical noise, call vol is trading at a discount to ATM for the first time in memory, and Ethena has announced a significant and potentially consequential revamp of the USDe reserve asset structure.

Geopolitics: Iran Blockade Threat

Pakistan Talks Collapse The peace talks hosted by Pakistan have collapsed. The US attributes the breakdown to nuclear concerns, a characterisation we are sceptical of. Trump has issued a new deadline of 10:00am Eastern today for the US to begin blockading Iranian ports if conditions are not met. WTI was already up 9-10% at the time of the call, trading at approximately $104 per barrel, back above $100 for the first time in several weeks. Russell's assessment: "This is a very different animal from Venezuela. This is an escalation rather than some light at the end of the tunnel. This is probably going to be very bearish in terms of risk assets if this starts escalating." Iran Cannot Reroute: The Caspian Dead End A blockade of Iran's southern ports cannot be circumvented via the Caspian Sea. Iran's refining and export infrastructure sits on the Persian Gulf side of the Strait of Hormuz. The Caspian is underdeveloped, primarily used for oil swaps rather than exports, and surrounded by competing producers including Russia and Kazakhstan. A northward reroute via Kazakhstan or Russia is not commercially or logistically viable at the volumes required. Expect oil to remain bid until the situation materially improves.

Hungary: Orban Out, Europe Redrawn

Peter Magyar's Tisza party won a landslide majority in Hungary: 138 seats to Fidesz's 55, with record voter turnout. Viktor Orban, who had become the EU's primary internal spoiler on Ukraine policy, is out. The EUR 90 billion Ukraine loan he had blocked will now move forward. The EUR 17 billion EU capital allocation for Hungarian infrastructure, stalled under Orban, is also cleared. Hungary will pivot decisively away from Moscow and toward Brussels and Kyiv, removing a persistent veto threat from within the EU on Ukraine support.

Last Week's Data: Broadly Cold

US: Near-Universal Misses Read Indicator Actual Expected / Prior 54 55 expected Cold / Miss ISM Durable Goods -1.4% -0.5% expected Cold / Miss In line Neutral PCE In line Neutral PCE Price Index 3.0% 0.5% 0.7% expected Miss GDP CPI (headline) In line vs 3.3% prior In line 0.9% 0.2% 0.3% expected One tenth cold CPI ex Food & Energy Michigan Sentiment 47.6 52.0 exp / 53.3 prior Big miss; below 50 Inflation Expectations 3.4% 3.2% expected Hawkish beat KEY Source: Hilbert Trader Call, 13 April 2026 Michigan Sentiment at 47.6 is below 50, which Russell flags as the threshold for a contracting economy. Combined with the GDP miss and the durable goods decline, the growth picture is weakening. The data as a whole is dovish for the Fed, which is exactly what you would expect heading into an oil shock. The single hawkish outlier remains inflation expectations at 3.4% vs 3.2% expected, the number we and the Fed watch most closely. Russell Thompson, CIO "As I keep saying every week, the most important number the Fed looks at is inflation expectations. It came in quite hot at 3.4 against 3.2 expected. That really flew in the face of a great deal of bearish, dovish numbers on the inflation side of things." On oil-driven inflation, we reiterate our structural view: higher oil prices are disinflationary in the medium term rather than inflationary. The Fed has historically looked through commodity-driven inflation spikes. Private credit is also showing early signs of stress, with several redemption gates having been applied. We are watching this carefully. UK and Europe: No Case for Hikes Region / Indicator Result Hilbert View European CPI In line ECB will not hike; rate cut thesis intact UK CPI (headline) Bang in line Short Sterling / short Gilts trade maintained UK House Prices -0.5% vs +0.1% expected Sterling crisis thesis reinforced UK Politics Worsening economic backdrop Starmer leadership challenge within next quarter Source: Hilbert Trader Call, 13 April 2026

Rates and Markets

Fed Funds: Drifting Dovish With 16 days until the next FOMC meeting, Fed fund futures are pricing 96.4% hold for April. For December, the market now prices 81.9% no change, 3.2% for higher rates and 15% for one cut or more. The direction of travel has shifted back toward the dovish side, which we view as sensible given the data. Last week's FOMC minutes contained nothing particularly noteworthy. Rates: Bear Steepener Underway Instrument Level Change (w/w) 4.35% US 10-Year Treasury Broadly flat 3.89% US 2-Year Treasury Broadly flat 2s10s Spread 51.5bp +11.5bp (was 40bp) Source: Hilbert Trader Call, 13 April 2026 The yield curve has been bear steepening: the 2s10s spread moved from 40bp to 51.5bp on the week, driven by the long end rising faster than the short end. This is a classic bear steepener, typically associated with rising inflation expectations or supply concerns at the back end of the curve, consistent with the oil shock environment. Markets Snapshot Asset Level Change (w/w) Nasdaq ~25,000 +1,000 pts S&P 500 6,775 +200 pts Gold $4,727 +$100 +9·10% this morning WTI Crude ~$104 European Nat Gas (Dutch) ~43.5 EUR/MWh -10% on week (but up today) US Dollar Index (DXY) 99 -1% (dollar slightly weaker) Source: Hilbert Trader Call, 13 April 2026 Equities are holding in despite the macro pressure, up on the week. WTI's return above $100 is the most significant move this morning, driven directly by the collapse of the Iran talks. Private credit stress is building in the background, with redemption gates being applied at several managers; this is flagged as a watch item rather than a crisis, for now.

Crypto: ETF Inflows Return, Vol Compresses

ETF Flows: Half a Billion in a Week Last week saw approximately $500 million in net ETF inflows into crypto, a material number after several weeks of flat or subdued flow data. Morgan Stanley launched its own crypto ETF, taking in $64 million of that total. The return of institutional ETF demand is a significant positive signal, suggesting that some allocators are using the current price weakness as a buying opportunity rather than an exit point. Volatility: Compressing Sharply This Week Last Week Metric Realized Vol ~39% ~41% ~45% Implied Vol (ATM) 43·44% Implied vs Realized Premium ~3pts 6·7pts DVol Indicator 44.5 (Feb lows) 2-month low ~45% 5-delta Calls (wings) ~41% 5-delta Puts (wings) 56·57% ~61% Put / Call Premium ~14·15pts ~16pts Flat Call wings vs ATM -3.5pts (discount) Source: Hilbert Trader Call, 13 April 2026 Unusual signal: calls trading at a discount to ATM. Call wing implied vol has fallen below ATM at around 41%, a 3.5-point discount. Russell flags this as highly unusual: "Being able to buy calls at a discount to ATM is not normal." For options traders this represents asymmetric value in upside optionality, particularly if a geopolitical resolution delivers a sharp Bitcoin rally. Bitcoin Technical Levels Bitcoin is holding well given the geopolitical backdrop. There was a push through $73k at the start of the peace talks; BTC is now trading at approximately $70,800, down from those highs but still above $70k. Short-term momentum indicators remain bullish above the $70k level. Level Price Notes Current price ~$70,800 Short-term indicators bullish above $70k First resistance $76,000 Key near-term cap; gamma kicks in $72·75k Second resistance $84,000 Daily close needed here to turn medium-term bullish Third resistance $88,000 Above $84k, next meaningful level First support $70,000 Key short-term floor Second support $66,000 Next level below $70k Triple bottom support $60,000 Lots of negative gamma here; break = nasty Source: Hilbert Trader Call, 13 April 2026 Gamma Structure On the upside, gamma kicks in at $72k to $75k, meaning market makers will need to start delta-hedging (buying) if Bitcoin pushes through this range, potentially accelerating any move higher. On the downside, gamma becomes significant at $62k and there is heavy negative gamma at $60k: a break of $60k would trigger forced selling from market makers, potentially accelerating a move lower very quickly. Open interest sits at 243,000 contracts (versus 245,000 last week), squarely in the mid-to-low range, suggesting leverage in the system is modest.

Ethena: A Major Reserve Restructuring

WATCH What Is Changing Ethena has announced a significant revamp of the asset backing structure underpinning USDe. The current model, which generates yield primarily through the basis trade on Ethereum/Bitcoin perpetuals and US Treasury bills as reserve, is being diversified across four new categories. TVL has edged down slightly to $5.8bn from $5.9bn last week; USDtb sits at $940m. New Reserve Category Details Status Overcollateralized stablecoin Planned Lending from USDe reserves; triparty with Anchorage, Maple, Coinbase lending Overcollateralized prime Planned Prime lending to trading firms lending IG corporate funds, short-term credit, structured credit; first: AAA CLOs Real world assets Planned (~120bp over Treasuries) Gold, silver, oil perpetuals on Hyperliquid; gold/silver basis currently mid- Planned Commodity basis trades 20s Source: Hilbert Trader Call, 13 April 2026. Full details on Ethena website. Hilbert's Concerns We view the Ethena changes with informed caution. The expansion into overcollateralized lending and commodity basis trades introduces risks that are qualitatively different from the original structure. There is the Gemini precedent: overcollateralized lending works until it does not. It should also be noted that the commodity basis trade can move very sharply. Ethena has established a risk committee to oversee the new structure, which we view as a positive step but not sufficient on its own. Russell Thompson, CIO "The nature of the risk from being a quite simple asset-backed structure, through doing the basis trade in Ethereum, and then being slowly expanded into things like T-bills, is going to dramatically change over the next few months. We have a professional obligation to keep an eye on how that might change the underlying exposures, particularly as we use this coin as one of our main collateralized stablecoins."

Clarity Act: Banking Committee Markup in April

The broad agreement between stablecoin issuers and banks on the Tillis-Alsobrooks language is holding. The banking committee markup needs to complete in April for Clarity to have any realistic chance of passing before the summer recess. Our view is unchanged: if it does not pass before the recess, it is dead until the next election cycle. The call was brief on this topic given the detailed coverage in the prior week's quarterly CIO call. intended for professional and institutional investors only. Hilbert Group AB is listed on Nasdaq First North Growth Market.