美债回购加码与日资撤离，比特币展现数字黄金属性

The US Treasury is now aggressively buying back its own bonds because [music] there aren't enough regular buyers willing to back America. On the 18th of August, total US [music] public debt crossed $40 trillion, but the Treasury Secretary's response 2 days later was to [music] put his foot on the accelerator. And in the recent past, this kind of [music] stress would be bad news for Bitcoin, too. BTC traded like a tech [music] stock with the volume turned all the way up.

When the NASDAQ fell, Bitcoin fell harder. But that relationship is shifting. Tech stocks have been getting hit hard. The bond market has been under major pressure. The fear and uncertainty in Tradfi [music] has been palpable. And yet, Bitcoin just put in one of its all-time craziest rallies. [music] So, today we're looking at what's actually breaking in the financial system. Why things seem to be getting worse as they try to fix it and why Bitcoin is emerging from this looking exactly like what [music] it is, digital gold.

My name is Guy and this is the Coin Bureau. Now, let's start with what's at the very center of everything here, debt. Net interest on US public debt came to $963 billion across the first 10 months of this fiscal year. That's about $3 billion a day. Interest payments are up $17 billion or 14% from the same period last year. The Congressional Budget Office or CBO expects them to top $1 trillion this year and hit $2.1 trillion by 2036.

Interest is now the second biggest expense in the federal budget, bigger than defense or Medicare and behind only social security. Meanwhile, the deficit has already hit $1.8 trillion just 10 months into the year, more than the entire deficit from last year. The CBO now expects it to reach $2.1 trillion by year end. So, the country is on track to borrow over $2 trillion this year despite not being in a recession. Perhaps the worst part, though, is that the US keeps blowing past expectations.

The CBO's 2023 baseline had the $40 trillion in debt mark arriving in 2028. But here we are, 2 years ahead of schedule. And that brings us to the man whose job it is to try and hold all this together. US Treasury Secretary Scott Bessant. On the 19th of August, the Treasury changed the buyback plan it had announced just 2 weeks earlier. It doubled the maximum size of each operation from $2 billion to at least $4 billion, focusing on longerterm bonds between 10 and 30 years.

The new plan runs from the 9th of September to the 4th of November. Now, the next day, Bessant told CNBC the Treasury could buy even more than $4 billion if needed, suggesting bigger buybacks are becoming the norm. And what's more, the timing of this aggressive uptick in policy and public statements was no mystery. The day before the announcement, the 30-year yield touched 5.33%, its highest reading in 19 years. After it, the 30-year settled back to around 5.19% and the 10-year came down as well.

So, the intervention worked well for a day or so until the market essentially told Bessant it wasn't having any of his nonsense and reversed the move. And on that note, there's an important point to be made here. The Treasury is not the Fed. It can't create money to buy bonds with. So every dollar spent buying long bonds back has to be raised somewhere else. The Fed can essentially print money and buy what it wants. The Treasury can't.

So it has to fund buybacks by issuing more bills. It's a bit like a household paying off the 25-year mortgage using the credit card. The headline number on the mortgage goes down. Nice. But the interest rate you're exposed to just got a lot more sensitive. Not so nice. Longdated debt gets retired. Shortdated paper replaces it. And the entire pile now reprices faster when rates move the wrong way. And the total pool didn't even grow.

It just got reallocated towards the long end. Now, the public commentary on this, which reflects market sentiment and confidence in the Treasury's actions, was far from positive. Mark Sobel, chief economist at the official monetary and financial institutions forum and a former Treasury official himself, said reckless fiscal deficits are the root cause of rising long-term yields and that increasing buybacks is quote akin to spitting into a gale force wind.

Chris Turner at ING wrote that adding $2 billion to buyback operations against a $40 trillion debt pile might seem like rearranging deck chairs on the Titanic. But whatever anyone says about this, objectively, the move itself is tiny relative to net issuance. What it does do though is move things closer to yield curve control. A serious measure where the government or central bank actively buys bonds to stop long-term interest rates rising too far.

In that sense, Bessence buybacks are a very mild version of that idea. A band-aid that risks causing other problems unless the government also gets its spending under control. But whatever you call it, the point is this. Long-term bond prices are no longer being set purely by buyers and sellers. The government is now stepping in to influence them. So then this raises the question of who [clears throat] actually stopped buying.

Well, this is where Japan comes in. And what's really unwinding here is a 30-year relationship between the two countries. For three decades, Japanese institutions were the most patient lenders America had because rates at home paid effectively nothing and American paper paid something. Life insurers, regional banks, pension funds, trust banks, corporate treasuries, all of them shipped savings across the Pacific. But that deal is now over.

The Bank of Japan raised rates to 1% in June, and Japanese bond yields have since climbed to levels not seen in decades. In August this year, the 10-year yield has been flirting with 3%, its highest since 1996, while the 30-year yield pushed above 4%. And with inflation still putting pressure on the Bank of Japan, markets are expecting further rate hikes. For the first time in decades, a Japanese investor buying a 10-year Japanese government bond earns roughly 100 basis points more than a currency hedged 10-year US Treasury.

And that's the whole issue in a nutshell. The money is now worth more at home than abroad. So, it's coming home. Japan is still the biggest foreign holder of US government debt, but it's been dropping its Treasury holdings in recent months. At the same time, Japanese banks are putting more money into bonds at home. Mitsubishi UFJ, Japan's largest banking group, bought around 1.4 trillion yen of Japanese government bonds in a single quarter.

Japanese investors are starting to prefer their own bonds, which means less money available to buy US debt. But there's a nasty flip side to this. Institutions that bought Japanese bonds years ago when yields were much lower are now sitting on huge paper losses. Japan's four largest life insurers have 96 billion in unrealized losses on their domestic bond holdings, while policy holders have also been pulling money out at a record pace.

But of course, the pressure isn't only in bonds. At the end of July, the yen fell past 164 to the dollar, the weakest in roughly 40 years. And what followed was the first coordinated US Japan yen buying intervention since 1998. The New York Fed funded the purchase by selling euros out of the exchange stabilization fund rather than dollars, specifically so it wouldn't pressure the dollar or force treasury liquidation.

The yen strengthened as a result of this record intervention, but much of the move has since been reversed, a similar result to Bessant's bond market shenanigans. So, America's largest foreign creditor is walking towards the door just as America needs to sell more bonds than at any point in its history. And while that massive sovereign debt mess develops, an entirely new borrower has arrived. But before we get into that, you can see by now that there's a lot to keep track of when you're digging into why markets are moving the way they are.

But it takes cons