Treasury's Repo Intervention Sends Yields Plummeting and Sparking Surge in Gold and Bitcoin

The US Treasury Department announced that it would double the scale of liquidity support repo operations for long-end nominal Treasuries, effective September 9. The single operation limit will be increased from $2 billion to at least $4 billion.

The move was made in response to a surge in 30-year Treasury yields, which reached 5.337% on August 18, the highest level since April 2007. Within minutes of the news landing, the 30-year yield plummeted from near 5.337% to 5.192%, a drop of about 15 basis points.

Gold surged over $125 in a single day to $4,487/oz, creating a new high since June 4. Bitcoin rose from an intraday low of $64,112 to $69,700, an 8.7% increase, approaching the $70,000 threshold for the first time in two months.

The repo operation is not printing money but rather using funds from the Treasury's General Account (TGA), which comes from taxes and new short-term Treasury bills issuance. The TGA ultimately relies on issuing short-term Treasury bills to supplement.