Treasury adds $785 million to federal debt load

The US Treasury conducted a debt buyback operation on Treasury Inflation-Protected Securities (TIPS) worth $785 million on Thursday, which was settled on November 21. This is the second buyback by the Treasury in the past week. 

Earlier, on Wednesday, the Treasury repurchased $3.4 billion in debt, just ahead of the release of September’s labor market report. The two purchases come on the heels of a fall in US Treasury yields on the 10-year note to 4.06% on Friday, its lowest level since late October. 

Some economists believe the drop in yields was caused by the delayed labor report for September, which showed higher-than-expected job creation for the month, while August’s numbers were revised downward. The report also revealed that the unemployment rate rose to 4.4%, the highest in almost four years.

US Treasury reacts to labor report and treasury yields change

US Treasury yields have been on a free fall over the past 48 hours, which has had little to no effect to both crypto and stock markets, although market watchers are expecting a reverse to take place before the next business week starts.

Treasury yields had already declined earlier in the week, following a selloff in US equities and crypto market mass liquidations beginning Thursday. The US stock market index S&P 500 dropped by 1.5% during the day’s close, while Bitcoin cut its value from $90,000 down to $85,000 before nightfall.

Some economists suggest that lower Treasury yields may encourage investors to move positions from traditional bonds to higher-risk assets, including cryptocurrencies. Proponents of the crypto market have pinned hopes on this trend to stabilize the volatile profit loss in digital assets that ensued this week.

Bitcoin slipped below the $95,000 level last week, briefly finding support near $96,000 over the past weekend. Bears regained control last Sunday, pushing the price down further below $90,000 before by Tuesday, and falling even lower to $88,000 the following day.

The decline continued on Thursday, with Bitcoin dropping to $86,000. After a minor rebound to $88,000, the cryptocurrency faced renewed selling pressure dragging it down to just over $80,000, its lowest level since April. 

Overall, the king coin has lost $12,500 since last Sunday and more than $29,000 since November 11. 

December interest rate cuts back in play after September jobs report

Interest rate futures traders have now priced a more-likely scenario for cuts this December, increasing the likelihood of a quarter-point Fed rate cut at the upcoming meeting from 30% on Wednesday to 70% on Friday, according to the CME FedWatch Tool.

Only a week ago, the odds of a December rate cut stood at 50%, and a month ago, markets nearly unanimously expected a cut, with probabilities at 99%.

New York Federal Reserve President John Williams suggested the central bank still has room to adjust rates to bring monetary policy closer to a neutral stance. Speaking in Santiago, Chile, Williams said: 

“I still see room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral, thereby maintaining the balance between the achievement of our two goals.”

He added that the Fed has created “modestly restrictive” conditions through recent rate cuts in October and September, but these have become “somewhat less so” in practice. 

US national debt now more than $38 trillion

In September, billionaire investor Ray Dalio warned of a potential “debt-induced economic heart-attack” within three years, likening the ballooning US federal deficit to a lifetime of poor dietary and lifestyle choices.

Cryptopolitan reported in late October that the US has accumulated a debt of more than $38 trillion, its fastest trillion-dollar increase outside the COVID-19 pandemic. 

Investors are still decoding the minutes from the Federal Reserve’s October meeting released Wednesday to see whether Fed officials say slowing labor markets or stubborn inflation rates are a threat to the economy. 

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