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Jurrien Timmer, Global Macro Director at Fidelity Investments, said that the US Treasury Department’s increase in long-term bond buybacks and its focus on issuing short-term Treasury bills is putting pressure on the dollar while supporting Bitcoin and gold.
Timmer pointed out that the dollar weakened last week after the US Treasury Department repurchased more long-term bonds and issued more short-term bonds in return. He argued that the strong rise in gold and Bitcoin prices during the same period reflected market expectations regarding the future of fiscal and monetary policies.
According to the renowned analyst, investors may have begun to price in a potential shift towards what is increasingly described as “fiscal dominance” in the US, and a weakening of the Federal Reserve’s independence.
Timmer made the following statements:
“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.”
“Increased Buybacks May Be Necessary to Keep Bond Yields Low”
According to Timmer, for the U.S. Treasury Department’s strategy to keep long-term bond yields under pressure to be successful, the bond repurchase program may need to be significantly increased beyond current levels.
However, Timmer noted that such a scenario could force the Federal Reserve to become involved, potentially meaning the central bank would participate in a kind of “Operation Maturity Restructuring” policy aimed at changing the maturity structure of the bond market.
Timmer stated that such a development could increase the risk of currency depreciation, and offered the following assessment:
“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.”
Timmer: Loose Fiscal and Monetary Policy is Positive for Bitcoin
According to the Fidelity executive, the simultaneous implementation of expansionary fiscal policy and loose monetary policy creates a particularly negative picture for the dollar.
Noting that the dollar is on a significant long-term trend line, Timmer said that such a macroeconomic environment is distinctly positive for gold, and Bitcoin could similarly benefit from it.
*This is not investment advice.
Source: cryptonews.net