The US Treasury bought $5.187bn of long-dated government bonds on 10 September, but Bitcoin received no immediate boost as spot Bitcoin ETFs recorded a net outflow of $282.7m.
The purchase was the first operation under Treasury’s expanded buyback programme. However, the 10-year nominal yield rose from 4.83% to 4.95%, while the 10-year real yield, adjusted for expected inflation, increased from 2.46% to 2.55%.
Higher real yields increase the return hurdle for Bitcoin, which does not generate income. The latest figures therefore showed that Treasury had improved trading conditions for selected older bonds, while the wider cost of money and demand through regulated funds remained unfavourable for the cryptocurrency.
Treasury accepts $5.187bn of bonds
Treasury received offers totalling $10.489bn against a maximum purchase limit of $6bn. It accepted 23 of the 40 eligible issues, with maturities ranging from February 2037 to August 2046.
The $6bn figure was a ceiling rather than a target. Treasury describes itself as a price-sensitive buyer and can accept less when offers do not meet its criteria. Securities purchased through the operation are retired after settlement, allowing the department to manage the composition of its debt rather than conduct a Federal Reserve monetary-policy purchase.
The programme is intended to support liquidity in off-the-run Treasury securities, which are older and generally traded less actively than the latest benchmark bonds. Treasury announced in August that maximums for longer-dated nominal buybacks would at least double from the previous $2bn level from 9 September.
Research by the Federal Reserve Bank of New York said such bonds trade less frequently, depend more heavily on dealer intermediation and may benefit from a predictable buyer. It also described the programme as modest compared with overall Treasury market volumes and dealer holdings.
The accepted amount showed that more than $5bn of eligible offers were available at acceptable prices. It did not establish whether bid-ask spreads, dealer capacity or economy-wide financing costs had improved.
Bitcoin demand remains under pressure
According to Farside Investors, US spot Bitcoin ETFs recorded a net outflow of $282.7m on 10 September. ETF flows indicate demand through regulated funds, but do not prove one-for-one selling in the spot market.
Bitcoin’s 10 September reference close was $76,568 before it recovered to about $77,800. The price remained close to the recently identified $76,000 support cluster, while real yields and ETF flows continued to point to pressure.
Other factors also influenced markets. The Bureau of Labor Statistics reported that final-demand producer prices rose 0.4% in August and 5.4% year-on-year. Goods prices increased 1.1%, partly because energy prices rose 4.2%.
The European Central Bank raised its three key interest rates by 25 basis points on 10 September and said its asset-purchase and pandemic-programme portfolios continued to shrink as maturing principal was not reinvested.
August US consumer inflation data was due at 8:30am ET on 11 September. A cooler reading could push nominal and real yields lower, while an upside surprise could extend the higher-yield environment.
Treasury’s operation may have improved liquidity in a specific part of the bond market, but its first post-purchase readings showed no clear benefit yet in the financial conditions most relevant to Bitcoin.
