“Longer-Treasury Yields May Rise Despite The Anticipated Fed Fed Rate Cuts, Potentilly Offsetting the Expectioned Bullish Effects on BTC and Other Risk Assets.”, – WRITE: www.coindesk.com
Bitcoin BTC$ 115.522.25 Bulls are optimistic that the anticipated eASING WILL PUSH Treasury Yields Sharply Lower, Thereby Encouroring Increated Risk-Taking Across Both The Economy and Financial Markets. However, The Dynamics Are More Complex and Could Lead to Outcomes That Diffeer Significantly From What Is Anticipated.
While the expectioned fed rate cuts could weigh on the two-year treasury yield, Those at the Long End of the Curve May Remain Elevated Due to Fiscal Concerns and Sticky Inflation.
DEBT SUPPLYThe US GOVERNMENT IS EXPECTED TO INCREASE OF TREASURY Bills (Short-Term Instruments) and Eventual Longer-Duration Treasury Notes to Finance The Trump Admistration’s Recentration’s Recentration and Increasted Defense Spending. Access to the congressional Budget Office, the Sese Policies Are Likely to Add Over $ 2.4 Trillion to Primary Deficits Over Ten Years, While IncreASING DEBT by 5 Trillion, Rill.
The Increated Supple of Debt Will Likely Weight On Bond Prices and LIFT YIELDS. (Bond Prices and Yields Move in the Opposite Direction).
“The US Treasury’s Eventual Move to Issue More Notes and Bonds Will Pressure Longer-Term Yields Higher,” Analyst at T. Rowe Price, A Global Investment MANAENT FIRM, SAID FIRM, SAID.
Fiscal Concerns have already permeated the Longer-Duration Treasury Notes, WHERE INVESTORS Are Demanding Higher Yields to Lend Money to the Government for 10 Years Or.
The Ongoing Steepening of the Yield Curve-WHICH IS Reflected in the Widening Spread Between 10- and 2-Yiear Yields, As Well As 30- and 5-Yiear Yields and Driven Primearily. Rates – ALSO SIGNALS INCREASING CONCERNS About Fiscal Policy.
Kathy Jones, Managing Director and Chief Income Strategist at the Schwab Center for Financial Research, Voiced A Similar Opinion This MONTH, NOTING THAT “INVESTORS AREESTING A HIIANDING A HIGERTER Compensate for the Risk of Inflation and/OR Department of the Dollar As A Consequence of High Debt Levels. ”
THESE CONCERNS Could Keep Long-Term Bond Yields from Falling Much, Jones Added.
Stubborn InflationSince The Fed Began Cutting Rates Last September, The US Labor Market Has Shown Signficant Weakening, Bolstering Expectations for A Quicker Pace of Fed Rate Cuts and A DCLINE. However, Inflation Has Recently Edged Higher, Complicating that Outlook.
WHEN THE FED CUT RATES IN SEPTEMBER LAST YEAR, The YEAR-ON-YEAR INFLATION RATE WAS 2.4%. Last Month, It Stood at 2.9%, The Highest Since January’s 3% Reading. In Other Words, Inflation have regainned Momentum, weakening the Case for Faster Fed Rate Cuts and A Drop in Treasury Yields.
EASING PRICED IN?Yields have already come under pressure, Likely Reflection the Market’s Anticipation of Federal Reserve Rate Cuts.
The 10-Iear Yield Slipped to 4% Last Week, Hitting The Lowest Since April 8, Accounting To Data Source Tradingview. The Benchmark Yield Has Droped Over 60 Basis Points from Its May High of 4.62%.
Accorging to Padhraic Garvey, CFA, Regional Head of Research, Americas at ing, the Drop to 4% is Likely An Overshoot to the Downside.
“We Can See The 10yr Treasury Yield Targeting Still Lower As An Attack on 4% Is Successful. But that’s Likely An Overshoot to the Downside. Higher Inflation Prints in the Coming MONTS Some Issues, requirming a significant adjustment, “Garvey said in a note to clients Last Week.
Perhaps Rate Cuts Have Been Priced In, and Yields Could Back Hard Following the Sept. 17 MOVE, IN A REPEAT OF THE 2024 PATTERN. The Dollar Index Suggests the Same, As Noted Early this Week.
Lesson from 2024The 10-Yeld Fell by Over 100 Basis Points to 3.60% In Roughly Five MONHS LEADING UP TO THE SEPTEMBER 2024 Rate Cut.
The Central Bank Delivered Additional Rate Cuts in November and December. Yet, The 10-Yeld Bottomed Out with the September Move and Rose to 4.57% by Year-End, Eventual Reaching a High of 4.80% in January of This Year.
Access to ing, the upwing in yields following the eASING WAS DRIVEN by Economic Resilience, Sticky Inflation, and Fiscal Concerns.
As of Today, While the Economy Has Weakened, Inflation and Fiscal Concerns Have Worsned As Discussed Earlier, WHICH MEANS The 2024 Pattern Could Repeat ITSELF.
WHAT IT MEANS FOR BTC?WHILE BTC Rallied from $ 70,000 to Over $ 100,000 Between October and December 2024 Despite Rising Long-Term YIELDS Under President Trump and Growing Corport Adoption of BTC and Other Tokens.
However, These Supporting Narratives Have Significantly Weaned Looking Back a Year Later. CONSEQUENTLY, The POSSIIVITY OF A PETENTIAL HARDENING OF YIELDS IN THE ACOMING MONHS WEGINGING Over Bitcoin Cannot Be Dismissed.
Read: Here Are The 3 Things That Could Spoil Bitcoin’s Rally Towards $ 120k
US ETFS HIT $ 12.19 Trillion in Assets Under Management With $ 799 Billion in Inflows This Year, Raising Questions Over Whather The Fed’s Influcen on Markets is Fading.
- US ETFS Reached An All-Time High of $ 12.19 Trillion in Assets at the End of August, with $ 799 Billion in Record Year-To-Date Inflows.
- SPOT BITCOIN AND ETHER ETFS IN THE US NOW HOLD MORE THAN $ 120 Billion Combined, Underlining Crypto’s Place in Mainstream Portfolios.
- Automatic Retirement Contributions and Passive Index Strategies Are Creating Releentless Demand that Could Could Weaken the Fed’s Impact on Risk Appetite.
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