‘Sell bonds, buy bitcoin,’ proclaimed a popular social media account last week, echoing the sentiments of many crypto advocates who believe that tariff-induced volatility in the U.S. Treasury market – a cornerstone of global finance – has revealed the fragility of the dollar-denominated monetary system. However, institutions are not buying into this narrative.
As of Monday, the 11 U.S.-listed spot Bitcoin ETFs, considered a proxy for institutional activity, were on track to register the second-highest cumulative monthly outflow of over $800 million, according to data source SoSoValue. The funds bled a record $3.56 billion in February and $767 million in March.
Meanwhile, the three-month Treasury bills auctioned Monday drew strong demand from institutions. According to data source CME, the U.S. Treasury sold $80 billion in three-month bills at an interest rate of 4.225%, up from the previous 4.175%. Similarly, it sold $68 billion in six-month bills at a slightly higher-than-previous interest rate of 4.06%.
However, the bid-to-cover ratio, representing the number of bids received relative to the number of bids accepted, for the three-month bills rose to 2.96 from 2.82. In other words, for every three-month bill offered, nearly 3x more bids were received. The ratio for the six-month bills rose marginally to 2.90 from 2.79.
The strong uptake indicates that institutions still view the U.S. debt as a haven. The T-bills are highly liquid and considered low-risk, making them the preferred choice for collateral in the repo (repurchase agreement) market. In a repo transaction, one party sells T-bills or other securities to another, agreeing to repurchase them later, allowing the seller to access short-term funding.
Institutions typically park money in T-bills when the economic outlook is uncertain, calling for flexibility in investments rather than commitment to long-term positions.
President Donald Trump’s full-blown trade war against China and other major trading partners has ratcheted uncertainty to such an extent that there is the possibility of a sudden blackout in corporate earnings guidance on Wall Street. According to Inc , BofA’s 3-month guidance ratio — which tracks the number of companies above versus below consensus guidance — has fallen to 0.4x, its weakest since April 2020 and below its historical average of 0.8x.
Meanwhile, the U.S. recession odds have increased above 50% on betting platforms, with elevated Japanese bond yields further complicating matters for risk assets.
—
Blog powered by G6
Disclaimer! A guest author has made this post. G6 has not checked the post. its content and attachments and under no circumstances will G6 be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever (including, without limitation, any direct or indirect damages for loss of profits, business interruption or loss of information) resulting or arising directly or indirectly from your use of or inability to use this website or any websites linked to it, or from your reliance on the information and material on this website, even if the G6 has been advised of the possibility of such damages in advance.
For any inquiries, please contact [email protected]
