I'm LongbridgeAI, I can summarize articles.U.S. Treasury yields hit 4.85% despite a $6 billion buyback, signaling strong selling pressure and potential risks to risk assets like crypto ahead of the FOMC meeting. Analysts warn that rising yields may exceed 5%, tightening financial conditions and increasing economic uncertainty.
The last 24 hours have been a wake-up call for investors. Speculation about a rate hike at the next FOMC was already making waves across social media.
However, the latest move of the U.S. Treasury Secretary Scott Bessent may have given the market a further hawkish push.
For context, the U.S. Treasury launched a $6 billion buyback of 10- to 20-year Treasuries, nearly 3x its previous $2 billion operation.
A bigger purchase normally drives bonds higher and eases yields, but the market snapped in the opposite direction, sending the 10-year yield to 4.85% for the first time since 2023.
This poses a bigger risk to risk assets.
The reason is simple: The fact that yields are rising despite the $6 billion buyback suggests that there is still a huge selling pressure in the bond market. If this selling pressure persists, it will only lead to higher yields, and that will only make conditions for risk assets harder.
Analysts at Kobeissi Letter already expect the 10-year Treasury yield to move above 5.00% by next week.
From a technical standpoint, rising yields make capital pricier, reducing investors’ willingness to take on risk. But the key takeaway is the signal behind this move: rising Treasury yields point to increasing volatility and uncertainty in the U.S. economy.
If this pressure persists, it could tighten financial conditions further and weigh on crypto through the rest of the monthly cycle.
Treasury sell-off raises fresh risks for crypto
With the FOMC less than a week away, the timing of the buyback starts to carry more weight.
Clearly, the U.S. Treasury is seeking to ease pressure in the bond market, as a buyback will reduce the supply of Treasuries on the market, supporting bond prices and lowering yields. However, the yields are rising despite the buyback, which shows that there is a lot of selling pressure.
The key takeaway? Analysts at Kobeissi Letter see this as a warning sign of increased pressure underneath the U.S. economy.
As the post below highlights, several factors are weighing on this equation: oil prices rising due to the war, a government deficit that is costing nearly $2 trillion, around $1.2 trillion in annual interest expenses, and a 60% chance of the market pricing in a rate hike.
All together, these factors could keep yields high, tighten financial conditions, and put pressure on risk assets.
In short, the jump in the 10-year Treasury yield to 4.8% may not be the end.
Instead, with increasing economic pressure in the US, the yields may break above 5%, especially with the FOMC just around the corner. If the yields continue to rise, investors may become less willing to allocate capital to risk assets, creating another headwind for crypto.
This, in turn, makes the Treasury yields a key trend to watch this week.
Final Summary
- Treasury yields above 5% could put more pressure on crypto.
- With the FOMC near, rising yields are a key risk to watch this week.