Bitcoin and cryptocurrency have skyrocketed. And the yield on 30-year US government bonds, on the contrary, fell sharply below 5.20%.
Why?
The fact is that the US Treasury has doubled the volume of repurchases of its own long-term bonds.
What is a reverse buyout?
This is when the US Treasury itself enters the market and buys back bonds previously issued by it.
How it works:
The Ministry of Finance withdraws part of the bonds from circulation \ their supply on the market falls \ the price of bonds increases, and their yield decreases because of this.
What specifically changes:
The US Treasury is increasing the size of these operations to buy back securities with terms ranging from 10 to 30 years from $2 billion to $4 billion at a time. Such redemption will take place from September 9 to November 4.
Why is this done?
The Ministry of Finance officially declares that it is doing this to maintain liquidity (so that it is easy to buy and sell securities on the market), and not to artificially lower the level of profitability.
In reality, the very moment when they announced it is important. The statement was made when the cost of borrowing for the state reached its maximum since 2007.
The market took it unambiguously: the government intervened to support its own public debt. Traders and investors perceive this as "saving" from the state + softening of monetary policy.
The only policy is that they buy their own bonds at the expense of NEW DEBT.
But by reducing the yield of long-term bonds, they only increase the total debt even FASTER, on which interest accrues (and the payment of this interest has long exceeded the defense budget).
Plus, it devalues the purchasing power of everyone who holds their fiat money. So they are temporarily masking the problem (which will only get worse because of it) at the expense of their own citizens.
This story reminded me again why I once believed in Bitcoin. And what is the alternative to this madness?
Why?
The fact is that the US Treasury has doubled the volume of repurchases of its own long-term bonds.
What is a reverse buyout?
This is when the US Treasury itself enters the market and buys back bonds previously issued by it.
How it works:
The Ministry of Finance withdraws part of the bonds from circulation \ their supply on the market falls \ the price of bonds increases, and their yield decreases because of this.
What specifically changes:
The US Treasury is increasing the size of these operations to buy back securities with terms ranging from 10 to 30 years from $2 billion to $4 billion at a time. Such redemption will take place from September 9 to November 4.
Why is this done?
The Ministry of Finance officially declares that it is doing this to maintain liquidity (so that it is easy to buy and sell securities on the market), and not to artificially lower the level of profitability.
In reality, the very moment when they announced it is important. The statement was made when the cost of borrowing for the state reached its maximum since 2007.
The market took it unambiguously: the government intervened to support its own public debt. Traders and investors perceive this as "saving" from the state + softening of monetary policy.
The only policy is that they buy their own bonds at the expense of NEW DEBT.
But by reducing the yield of long-term bonds, they only increase the total debt even FASTER, on which interest accrues (and the payment of this interest has long exceeded the defense budget).
Plus, it devalues the purchasing power of everyone who holds their fiat money. So they are temporarily masking the problem (which will only get worse because of it) at the expense of their own citizens.
This story reminded me again why I once believed in Bitcoin. And what is the alternative to this madness?