Trump’s Wild Plan: Will Lower Yields Make Bitcoin Soar or Just Fizzle? 🤔💸

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What to know:

  • So, the Trump administration is on a mission to lower the 10-year yield. Because why not? 🎯
  • Lower yields, thanks to a sprinkle of lower inflation, could be a good sign for BTC. Or not. 🤷‍♀️
  • But hold your horses! Reduced fiscal spending might throw a wrench in the works. 🐴
  • Analysts are scratching their heads, wondering if Trump’s plan is a genius move or just a wild goose chase. 🦢

U.S. Treasury Secretary Scott Bessent spilled the beans on Wednesday, saying the Trump team wants to cut borrowing costs by lowering the yield on the 10-year Treasury note. Because who doesn’t love a good financial rollercoaster? 🎢

“He and I are focused on the 10-year Treasury,” Bessent told Fox Business, as if that’s the most exciting thing happening in the world right now. “He is not calling for the Fed to lower interest rates,” he added, probably while rolling his eyes. 🙄

The 10-year yield, aka the risk-free rate (ha!), influences most long-term loans, including mortgages and business loans. So, if it drops, it’s like a green light for borrowing and investing. Let the risk-taking begin! 💃

Lowering the 10-year yield is usually seen as a thumbs-up for risk assets, including our beloved bitcoin (BTC). Trump’s plan to control inflation might just be the fairy dust BTC needs, but reducing the budget deficit could rain on that parade. ☔

“The energy component for them is one of the surest indicators for long-term inflation expectations,” Bessent said, as if we all have a PhD in economics. Boosting energy supply could help lower inflation. Who knew? ⚡

In a perfect world, lower inflation would let the Federal Reserve keep cutting rates, which are still in the “please don’t touch” zone. That could add some pep to the bullish momentum in risk assets. Since September, the Fed has lowered the benchmark borrowing cost by 100 basis points to a range of 4.25%-4.5%. 🎉

Meanwhile, Bessent’s grand strategy to push down the 10-year yield also involves tackling that pesky budget deficit by cutting fiscal spending. Less spending means fewer bonds, higher prices, and lower yields. Simple math, right? 📉

But wait! The Biden administration’s “spend, spend, spend” approach has been keeping the financial markets greased up. So, any cuts could send risk assets, including cryptocurrencies, into a tailspin. Yikes! 😱

“Of course, getting the 10-year yield on a downward path implies moves to improve the U.S. fiscal position, as well as inflation. So far, we’ve had his partner, Musk, cutting Federal government programs like USAID, Federal employees and such. Which really doesn’t scratch the surface,” ForexLive’s Chief Asia-Pacific Currency Analyst Eamonn Sheridan noted, probably while sipping a latte. ☕

“Most of the U.S. spending is on healthcare, Social Security, and defense. Will Trump inflict the pain that his focus seems to imply? There is barely a politician out there that would,” Sheridan added, as if we needed more drama. 🎭

Enjoy the move lower while it lasts

The 10-year yield has dropped by 38 basis points to 4.42% as markets price in lower energy prices and non-inflationary growth. According to Bessent, it’s all sunshine and rainbows. 🌈

But hold your applause! Analysts at ING are not convinced this drop will stick around. “We also assert there is not huge room to the downside for the 10-year yield. An effective floor is in place at just under 4%,” they said, probably while shaking their heads. 🙅‍♂️

ING added that it’s hard to see a big driver for a lower 10-year yield, unless The Department of Government Efficiency, or DOGE, suddenly becomes

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2025-02-06 10:04