US Treasury Yields Rise Despite Buyback: Will Pressure on Bitcoin Persist?
US 10-year Treasury yields have surged to their highest levels since October 2023, despite a $6 billion buyback.
According to a report by CoinDesk, the yield on the 10-year US Treasury note rose to 4.856%. The Treasury Department’s announcement that it would buy back long-term bonds had created expectations for lower borrowing costs. However, the market reaction shifted in the opposite direction of expectations.
The Treasury’s latest operation targets bonds with maturities of 10 to 20 years and involves a $6 billion debt buyback. This amount is at least double the typical $2 billion transactions. Despite this, the 30-year bond yield rose above 5.3%, nearing its peak in August.
Bond buyback failed to reduce borrowing pressure
The buyback program aims to limit the rise in yields and support market liquidity by increasing demand for long-term bonds. Although yields initially declined following the announcement, they later rose sharply.
According to analysts, the fundamental issue is that the buyback does not eliminate the US government’s total borrowing needs. While the Treasury buys back long-term bonds, it continues to finance itself through short-term instruments. This transaction only changes the maturity structure of the debt; it does not reduce new borrowing requirements.
Rising public spending and high federal debt are keeping concerns alive that more bond issuances could occur in the future. As bond yields also rise in Europe and Japan, investors are worried about inflation, oil prices, and the sustainability of public debt.
High yields continue to be a pressure factor for Bitcoin
The rise of long-term bond yields into the 4% to 5% range can exert pressure on risky assets like Bitcoin. This is because every dollar invested in Bitcoin means forgoing the opportunity to earn the 4-5% yield offered by long-term Treasury bonds.
However, this relationship works more strongly during periods when yields rise due to economic growth. In the current uptrend, high public debt, expectations of increased spending, inflation, and oil prices are more prominent. This distinction suggests that the impact of rising bond yields on Bitcoin depends on prevailing economic conditions.
In this environment, Bitcoin is moving sideways around $78,000. WTI oil rising to approximately $97 per barrel also heightens concerns that inflation could remain high for longer through energy costs. This outlook increases fears that energy costs could keep inflation elevated, complicating the Federal Reserve’s task.