Welcome to the Forward Guidance newsletter, brought to you by Casey Wagner, Ben Strack and Felix Jauvin. Here’s what you’ll find in today’s edition:

• Why rate changes impact the US, Canadian economies differently.

• The SEC commissioner confirmation vote that didn’t happen, and what’s next.

• Grayscale’s ex-CEO shifts his focus to the nascent tokenized RWA market.

A Tale of Two Economies

For those who don’t know, I’m Canadian. However, I spent nearly every hour of the day thinking about macro from a US perspective. In the world of markets, the US is at the center and everything else is secondary. 

Reflecting on the two worlds I live in poses an interesting vignette as to why it feels like the Fed keeps stopping and starting on its approach to monetary policy with respect to the economy. 

The Canadian unemployment rate just hit a cycle high of 6.8% and looks to be climbing even higher, whereas the US’s unemployment rate seems to be flatlining. Yes, both economies were affected by an increase in labor supply caused by immigration, but the Canadian labor market is worse across the board. 

Canada has managed to get its inflation rate back to 2% on a year-over-year basis, while the US remains stubbornly above target:

The Bank of Canada just surprised markets this week by going for another 50-basis point rate cut vs. the recent 25bps cuts they’ve been doing. The US is expected to squeeze in one more rate cut next week before pausing for a while as the economy continues to surprise to the upside. 

So what gives? What’s driving the discrepancy between two similar economies that trade quite closely?

Simply put, the US financial system is much less sensitive to changes in short-term interest rates than Canada’s. Here are two examples:

Corporations 

US companies have access to the largest debt markets in the world and can issue fixed-rate bonds at tight spreads, whereas Canadian companies (as is normal in non-US countries) are more inclined to issue floating-rate debt, which changes instantly with changes in central bank policy rate. 

Households

In the US, homeowners can sit on a 30-year fixed-rate mortgage and as long as they don’t move, the Fed could hike rates to 50% and it still wouldn’t affect them. The rate they’ve locked in is the one for the entire mortgage. Considering how many households refinanced their mortgages at the Covid lows (sub-3%), as long as they don’t move, they’re unabated by increasing interest rates. This is very different in Canada and most other countries, where even on a 25-year fixed-rate mortgage, the rate gets reset every five years. Therefore, even if homeowners stay put, they will eventually be affected by the increase in rates. 

These two examples showcase why the Fed is having so much trouble getting into a consistent policy path — its main tool cannot impact large swaths of the economy like it can in other countries. And so here we are instead, with increasing dispersion in economies between the US and everybody else. Oh, sweet US exceptionalism. 

— Felix Jauvin

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The percentage of Microsoft shareholders that voted for a proposal to have the company’s board consider investing in bitcoin. There were about 28,000 votes for the proposal and more than 5.1 million against it.

You likely heard the result (we wrote about it Tuesday), but might have missed this final tally. The low percentage of “yes” votes likely reflects the board’s recommendation to vote “no” — claiming Microsoft management “already carefully considers this topic.”

This lame duck Congressional session is proving to be anything but boring.

If you read Tuesday’s edition, you’ll recall Ben wrote a preview piece on SEC Commissioner Caroline Crenshaw’s confirmation, which the Senate was scheduled to vote on yesterday. 

But thanks to an 11th-hour push from the GOP, the vote didn’t happen. With days to go before adjournment, the vote might not happen this session at all. 

The whole situation could be chalked up to a battle of egos and power between parties (Republicans would love to go into 2025 with one more SEC seat up for grabs while some Democrats are trying to lock in Crenshaw before Inauguration Day). 

On that first point, remember that the commission must be bipartisan. President-elect Donald Trump would therefore have to nominate at least two Democratic commissioners should Crenshaw lose her seat; but the idea is he’d perhaps find a more moderate replacement. 

Politics aside, it appears there’s another issue at the core of the dispute: crypto policy. 

Democratic Rep. Shri Thanedar said Thursday he’s “glad to see the Senate delay the vote.”

“Voters just delivered Congress a crypto mandate this November,” Thanedar added in an X post. “We should make sure the leaders we nominate support crypto as well.”

Crenshaw voted against approving spot bitcoin ETFs at the beginning of the year. The ether ETFs that launched in July were approved by delegated authority, so we don’t have a voting record for that decision. 

If the nomination continues to stall and no replacement is confirmed, Crenshaw could remain in her position until January 2026.

This is a developing story. Keep an eye on Blockworks.co for the latest updates.

— Casey Wagner

Grayscale-related headlines have been aplenty this year, from GBTC’s conversion to an ETF, its outflows, the product’s spin-off, more filings and trust launches, yada yada.  

A tangential update (also surfacing today) is that Grayscale’s former CEO, Michael Sonnenshein, joined Securitize as its chief operating officer. 

So the ex-leader of one of the largest crypto asset managers shifts his focus to bringing real-world assets (RWA) on-chain — “which candidly I think is one of the most exciting frontiers in the broader blockchain and digital assets space,” Sonnenshein told me this morning.  

While at Grayscale, Sonnenshein worked on bringing digital assets into more traditional wrappers. At Securitize, he acknowledged, it’ll pretty much be the other way around.   

The tokenized RWA market has lots of room to run before some lofty projections are met. One point of agreement at Brooklyn’s RWA Summit I attended in October was that the specific utility and benefits (and the economics behind that) will be what drives tokenization forward. 

Tokenized fiat currencies (aka stablecoins, a roughly $200 billion market) are well-established. Securitize helped BlackRock tokenize its USD Institutional Digital Liquidity Fund (BUIDL) in March, which has helped spotlight another use case.   

After all, US Treasurys (which BUIDL is backed by) are the collateral serving as the “substrate” for many capital markets transactions, Sonnenshein said. 

He added: “Continuing to build products that can address some of the inefficiencies and … move into offerings where the underlying assets are not dollars, but instead yield-bearing assets, I think is a very, very attractive value proposition.”

— Ben Strack

• November’s PPI increased 0.4% from October, coming in higher than the consensus expectation of 0.2%. 

• The European Central Bank on Thursday lowered interest rates for the fourth time this year, citing slowing inflation and increased economic risks associated with new tariffs under US President-elect Donald Trump.

• Speaking of Trump, he said during an appearance at the New York Stock Exchange Thursday that his administration is “gonna do something great with crypto because we don’t want China, or anybody else” to get ahead.