Fidelity Investments’ Global Macro Director Jurrien Timmer argues that recent U.S. Treasury operations—specifically increased long-term bond buybacks paired with heightened short-term bill issuance—are pressuring the dollar while providing tailwinds for Bitcoin and gold.
Treasury Buybacks Weaken Dollar, Lift Bitcoin and Gold
Timmer observed that the dollar declined last week following the Treasury’s repurchase of additional long-term bonds funded by issuing more short-term securities. He contends the concurrent sharp rally in both gold and Bitcoin prices signals market anticipation of shifts in fiscal and monetary policy frameworks.
According to the analyst, investors may have started pricing in a potential transition toward what is increasingly termed “fiscal dominance” in the United States, alongside a perceived erosion of Federal Reserve independence.
“It is noteworthy that the U.S. Treasury Department’s issuance of more short-term Treasury bills last week while simultaneously buying back more long-term bonds dragged the dollar down and caused both gold and Bitcoin to rise sharply. The market senses a slippery slope towards fiscal dominance and a possible loss of the Federal Reserve’s independence.”
Larger Buybacks May Require Fed Involvement
Timmer suggests that for the Treasury’s strategy to effectively suppress long-term yields, the repurchase program may need to expand significantly beyond current levels. Such an expansion, he notes, could compel Federal Reserve participation in what amounts to an “Operation Maturity Restructuring” aimed at altering the maturity profile of the bond market.
He warns this trajectory carries heightened currency depreciation risks.
“For the U.S. Treasury Department to successfully keep interest rates low, it may need to significantly increase the size of repurchases. This could require the Federal Reserve to become involved in this Operation Maturity Restructuring policy, and could lead us down a path of currency depreciation.”
Expansionary Policy Mix Favors Bitcoin
The Fidelity executive emphasizes that the simultaneous pursuit of expansionary fiscal policy and accommodative monetary policy creates a distinctly negative outlook for the dollar. With the greenback testing a significant long-term trend line, Timmer views this macroeconomic backdrop as structurally positive for gold, adding that Bitcoin stands to benefit from the same dynamics.
This is not investment advice.
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