$4 Billion Bond Move Failed to Lower Yields: Why Did Bitcoin and Gold Rise?
The U.S. Treasury’s increase in the bond buyback limit did not lower interest rates; however, Bitcoin rose to approximately $80,000, and gold also climbed.
U.S. Treasury Secretary Scott Bessent increased the per-transaction buyback limit for 10-, 20-, and 30-year bonds from $2 billion to at least $4 billion on August 19. According to CoinDesk, the 30-year bond yield remained around 5.25%, staying near peaks not seen since 2007.
The market responded to the announcement through Bitcoin and gold rather than bonds. Bitcoin approached $80,000; billions of dollars in liquidations occurred as short positions opened in anticipation of a price drop were forced to close. Bond yields indicate borrowing costs. The fact that yields remained high revealed that the buyback move has not yet been effective in its primary objective.
Why didn’t bond yields fall?
The 30-year yield rose from 5.19% on August 19 to 5.25%. The 5.33% seen on August 18 was the highest level since 2007. The U.S.’s $40 trillion debt, expected budget deficits, and the increasing bond supply are keeping yields elevated. Ole Hansen from Saxo stated that while buybacks might provide temporary liquidity, they do not resolve debt and inflation risks. The rise in oil prices is also heightening inflation concerns.
Fabian Dori, Chief Investment Officer at Sygnum, noted that the move indicates the Treasury’s concern regarding long-term borrowing costs. This signal may have created demand for scarce assets like gold and Bitcoin by increasing expectations of stronger intervention and fears that currency value could depreciate. This does not mean money is being printed directly. High yields typically pressure Bitcoin, which does not offer interest income. However, if yields are rising due to debt and inflation fears rather than a strong economy, they can also be supportive. Robin Brooks from Brookings said that concerns over highly indebted governments are driving investors toward alternative assets.