Bessent Doubles Bond Buybacks as Bitcoin Hits $81,000

Treasury Secretary Scott Bessent doubled the maximum size of government bond buybacks from $2 billion to at least $4 billion on Monday to stabilize the bond market. The move follows a July budget deficit that reached a five-year high and total federal debt exceeding $40 trillion. Bessent stated he is attempting to bring equilibrium to the market, but investors remain skeptical of his ability to curb rising long-end yields.

These actions triggered a debasement trade on Wall Street, with investors shifting away from U.S. assets toward hard assets to hedge against a weakening dollar and rising debt. Bitcoin surged to $81,104, its highest level since May, while gold approached three-month highs near $4,636. The U.S. dollar index simultaneously hit three-month lows, further pressured by new U.S. sanctions against Iran and 50% tariffs on Canadian exports.

Market analysts warn that these conditions could worsen inflation, potentially forcing the Federal Reserve to raise interest rates at its October meeting. Ray Dalio, founder of Bridgewater Associates, recommended overweighting gold and bitcoin to hedge against the debt crisis, noting that the government's financial condition is at an inflection point.