The $40 Trillion Question

It’s Nvidia week, and the only company that seems to matter in the continuing AI bull run reports earnings on Wednesday. Meanwhile, markets are still trying to digest Treasury Secretary Scott Bessent’s surprise intervention in the bond market, doubling planned buybacks of long-dated Treasuries.

The amount itself is relatively small compared with the enormous volume of U.S. Treasuries traded every day, but it certainly caught the attention of investors in bitcoin and gold. Both had been languishing near downside support after falling sharply from their recent highs, but bitcoin gained 25% last week and gold is up 15% over the last two. Why such a strong reaction to a story that barely made the headlines amidst all the talk of the construction of the White House ballroom?

America’s national debt has just passed $40 trillion and long-term borrowing costs are at their highest in almost two decades. So when the issuer starts trying to influence the price of its own debt, you have to wonder whether cracks are beginning to appear. Particularly when Bessent says he has “asymmetric information” and investors are left wondering what the Treasury might know that markets don’t.

Nothing may come of it, and the U.S. Treasury market may very well be too big to fail, but if yields keep rising, America must tighten its finances or intervene more aggressively. The U.S. Treasury market has always been where investors run when something goes wrong. What happens when the thing going wrong is the Treasury market itself? Perhaps bitcoin and gold already know the answer.