Bessent's Bond Move Sends Gold and Bitcoin Soaring

US Treasury Secretary Scott Bessent recently announced an increase in the size of long-dated bond buybacks, aiming to cool down rising bond yields. The market initially reacted positively, with gold and bitcoin prices surging. However, this reaction was short-lived as investors soon realized that a $4 billion buyback operation is relatively small compared to the projected $550 billion in new government debt.

The Treasury's move was intended to address liquidity issues at the long end of the curve, but it may have unintended consequences. Bessent stated that the buyback program could go above the new $4 billion level, which some interpreted as a sign of the government's willingness to manage bond yields. However, this policy move creates tension with the Federal Reserve's strategy and adds uncertainty to the market.

Gold prices rose 2.8% to $4,546 an ounce after the announcement, while bitcoin surged more than 20% on the week to above $78,000. The dollar weakened as investors worried about U.S. debt and inflation risks.

The equity market's reaction was mixed, with stocks initially rallying but later falling as weak earnings from companies like Walmart and Alibaba weighed on sentiment. The Treasury's move has left traders uncertain about who is setting the tone in the market.