Debasement Trade Revived as Bond Yields Reach Highest Level Since 2007

Investors are piling into hard assets like Bitcoin and gold as the US Treasury signals that bond yields present a policy problem. This implies that the currency will be the release valve, pushing investors toward assets that operate beyond government money printing.

The US Treasury's communication has revived the debasement trade, which is based on the idea that governments will never stop devaluing their currencies. The 30-year bond yield last week touched its highest level since 2007 at 5.3%, and shorter-dated counterparts have also turned sharply higher in August.

Rising hard assets like Bitcoin, gold, silver, and platinum are benefiting from the situation. Gold jumped over 5% last week while Bitcoin notched a 23% gain for its best week since 2023. Silver and platinum have also rallied, with all signs pointing to them joining gold with positive year-to-date returns soon.

The US dollar has weakened by 2.4% over the last month for its softest close since May. This trend is not unique to the US, as other developed economies like London and Tokyo are facing similar math, including high federal debt and interest costs.