This surge in gold and bitcoin—Nomura has provided the rationale behind it.
Nomura believes that the U.S. Treasury’s sudden announcement to increase long-term Treasury repo operations is itself relatively small and only addresses the symptoms rather than the root problem. If the bond market continues to deteriorate, policymakers are likely to resort to even more forceful liquidity measures—for example, further implementing yield curve control (YCC) or truly conducting quantitative easing (QE).
And recently, yields on 10-year Treasuries—and especially 30-year Treasuries—have risen very quickly, to levels not seen in years. The higher the interest rates, the more expensive it becomes for the government to borrow itself; mortgage rates and corporate loan rates also rise, causing the market to slip into panic. That’s why the Treasury has stepped in to steady long-end yields.
If YCC or QE is ultimately triggered, the central bank’s money would begin buying Treasuries—or other assets—thereby injecting a large amount of liquidity into the market again.
So gold and bitcoin have continued to rise, while the U.S. dollar has fallen—becoming key signals that the market is pricing in a change in U.S. policy stance.
Nomura believes that the U.S. Treasury’s sudden announcement to increase long-term Treasury repo operations is itself relatively small and only addresses the symptoms rather than the root problem. If the bond market continues to deteriorate, policymakers are likely to resort to even more forceful liquidity measures—for example, further implementing yield curve control (YCC) or truly conducting quantitative easing (QE).
And recently, yields on 10-year Treasuries—and especially 30-year Treasuries—have risen very quickly, to levels not seen in years. The higher the interest rates, the more expensive it becomes for the government to borrow itself; mortgage rates and corporate loan rates also rise, causing the market to slip into panic. That’s why the Treasury has stepped in to steady long-end yields.
If YCC or QE is ultimately triggered, the central bank’s money would begin buying Treasuries—or other assets—thereby injecting a large amount of liquidity into the market again.
So gold and bitcoin have continued to rise, while the U.S. dollar has fallen—becoming key signals that the market is pricing in a change in U.S. policy stance.