The US Treasury said it would actually triple the size of its long-term bond buybacks – why didn’t it push BTC north again?
It was less than a month ago when the US Treasury Department announced it would double the maximum size of liquidity-support buybacks for longer-dated government debt.
Bitcoin’s price reacted at the time with an immediate leg up. The Treasury now said it would triple it to $6 billion, but BTC remained flat and even dipped. So, what changed?
Same Move, Different Reaction
On August 19, the Treasury Department’s Scott Bessent unexpectedly announced that the institution would at least double liquidity-support buybacks for longer-dated government debt from $2 billion to $4 billion per operation. Financial markets reacted immediately, with BTC and gold leading the surge. Meanwhile, long-term Treasury yields dropped.
By buying older long-term Treasuries, the government was essentially attempting to improve liquidity in a bond market suffering from rapidly rising yields. Declining yields, on the other hand, typically reduce the appeal of bonds and ease financial conditions, which is a friendlier environment for bitcoin and other risk assets.
The Treasury did it again yesterday, increasing the upcoming buyback to $6 billion. However, the 10-year Treasury yield jumped to 4.85%, its highest level in almost three years. The 20-year and 30-year yields also increased to about 5.30%. In contrast, the primary cryptocurrency not only didn’t rally as it did the last time, but actually dipped below $78,000 and has barely been able to reclaim that level since.
Why No Surge?
Perhaps the most notable difference between the announcement on September 9 and August 19 was the lack of actual surprise. Treasury’s move from last month represented an unexpected policy shift, and markets repriced the possibility that it was becoming more willing to intervene as long-term borrowing costs surged. In contrast, the increase to $6 billion in buybacks doesn’t appear to be enough as Wall Street estimates had stretched toward up to $10 billion following Bessent’s comments.
In addition, the macro environment continues to deteriorate. Oil prices surged $100 as the US-Iran war continues, and inflation fears are through the roof. Last week’s strong employment data and Kevin Warsh’s hawkish stance the previous Friday have simultaneously raised expectations that the Federal Reserve could hike interest rates on September 16.
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This combination is pushing yields faster than Treasury buybacks are able to push them down. The Kobeissi Letter described it as the bond market “fighting” the Treasury, warning that the 10-year yield could exceed 5% if current conditions persist. This is the key distinction for BTC, as it wasn’t exactly the Treasury buyback that sent it flying in August. Instead, it was what the announcement initially did to yields, liquidity expectations, and broader risk appetite.
The market message is quite different this time, even though the policy is similar.
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