US Treasury Secretary Scott Bessent has announced plans to regularly buy back long-term government bonds using an initial $4 billion allocation. The Treasury Department plans to execute these repurchases regularly and may increase the total spending amount in future operations.
Connors, the head of financial consulting firm Risk Dimensions, described the Treasury department's decision as atypical and suggested it represents a response to rising long-term borrowing costs. Over time, Connors expects monthly government bond buybacks to expand to between $10 billion and $30 billion.
According to the Risk Dimensions executive, high yields on US Treasury bonds make sovereign debt more attractive to investors compared to risk assets such as Bitcoin. By conducting regular bond repurchases, the Treasury can support bond prices and restrain further yield growth.
Treasury bonds are sovereign debt instruments issued by the US government to fund public spending, while Bitcoin is the world's largest cryptocurrency by market capitalization. High yields on government debt typically draw capital away from speculative digital assets.
Impact of Banking Rules and Bitcoin Targets
Connors identified a potential easing of the supplementary leverage ratio as another key factor for the financial market. The leverage rule limits the volume of assets, including government bonds, that banks can hold on their balance sheets relative to their equity capital. Connors said that if regulators relax the requirement, banks will purchase government debt more actively, which could move Bitcoin toward a target threshold of $180,000.
In the short term, Connors considers $72,000 a crucial price level for Bitcoin. He highlighted the lack of legislative progress on the CLARITY cryptocurrency regulation bill as a risk to digital asset markets, stating that Bitcoin could drop below $72,000 if consideration of the initiative fails to advance.
Standard Chartered Price Forecasts
The analysis follows earlier comments from Geoff Kendrick, head of digital assets research at Standard Chartered, a multinational banking firm. Kendrick said Bitcoin could rise to $100,000 by the end of the year, estimating that increased liquidity in the US government bond market would help support the cryptocurrency.
