Jurrien Timmer, Global Macro Director at Fidelity Investments, one of the world’s largest asset managers, says the U.S. Treasury Department’s increased buybacks of long-term bonds and its growing focus on issuing short-term Treasury bills are putting pressure on the dollar while lending support to Bitcoin and gold.

Timmer observed that the dollar weakened last week after the Treasury repurchased more long-term bonds while issuing more short-dated paper in exchange. The Treasury has been conducting regular buyback operations since 2024, resuming a practice last used in 2002, with the stated aim of supporting liquidity in the government bond market by repurchasing older, off-the-run securities. In his view, the strong rise in gold and Bitcoin prices over the same period reflected market expectations about the future direction of fiscal and monetary policy.

According to the analyst, investors may already have begun pricing in a potential shift toward what is increasingly described as “fiscal dominance” in the United States — a term economists use for situations in which a central bank’s policy choices are effectively constrained by the government’s financing needs — together with 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”

For the Treasury’s strategy of keeping long-term bond yields under pressure to succeed, the bond repurchase program may need to be expanded significantly beyond its current scale, Timmer argued. How far the program grows will become apparent in the Treasury’s quarterly refunding announcements, which set out planned issuance and buyback operations for the months ahead.

Such a scenario, he cautioned, 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. Any Fed participation would mark a shift from its current stance, since the central bank has been steadily reducing its Treasury and mortgage securities holdings since 2022 under its balance-sheet runoff. 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. Gold has long been treated by investors as a store of value, and Bitcoin is frequently described in similar terms as “digital gold,” a framing that often links both assets to concerns about the dollar’s long-term purchasing power.

Noting that the dollar is on a significant long-term trend line, Timmer said such a macroeconomic environment is distinctly positive for gold — and that Bitcoin could similarly benefit from it.

*This is not investment advice.

Source: bitcoinsistemi