On Monday (August 24), long-term US Treasury yields fell slightly amid rumors that the Treasury might use nearly $1 trillion in cash to support repurchase agreements. Gold prices had already risen above the 200-day moving average before the news broke, with safe-haven demand and concerns about the dollar's credibility rising simultaneously. Crude oil fell due to unresolved details of sanctions, but traffic volume around the Strait of Hormuz remained low. The Bessant press conference later in the evening and the Jackson Hole meeting on Friday are key short-term risks.

The Ministry of Finance's share buyback program coincides with the TGA (Treasury General Administration of Customs): The signal is stronger than the amount.

Treasury Secretary Bessant doubled the repurchase program for long-term "non-benchmark bonds" to at least $4 billion, and hinted at more. The market initially expected increased short-term Treasury bond issuance, but major overseas financial media outlets, citing officials, reported that nearly $1 trillion from the Treasury's general account might be used. If TGA cash is indeed used, it would effectively reduce long-term supply pressure without increasing net supply. The amount is small relative to existing debt, but traders will price in the "Treasury's willingness to manage the yield curve." US Treasuries would benefit in the short term. The risk lies in the possibility of a rapid pullback in long-term yields if implementation falls short of expectations.

Gold rises above the 200-day moving average: What happens in the afternoon is not what happens in the evening.

Gold prices climbed above the 200-day moving average this afternoon, the first time since June. Previous drivers included a weakening dollar and geopolitical risk aversion. The rumors surrounding TGA repurchase funds tonight merely reinforced this trend, rather than triggering it. Historical experience shows that this technical signal often exhibits near-term momentum, but the 30- to 60-day window may see repeated fluctuations. The key for gold remains not the moving average itself, but rather long-term real interest rate expectations and changes in the dollar's creditworthiness. If Treasury intervention is perceived as "de facto easing," gold will benefit.

Bessant and Warsh: The most worrying combination for US debt

Bessant's previous bet on declining interest rates failed, and its recent operations such as selling short-term bonds and buying long-term bonds, as well as currency swaps, are seen by the market as "tricks." Major overseas institutions point out that this is similar to a mini version of quantitative easing, but on a much smaller scale and the Treasury cannot print money. Adding to the problem is that Federal Reserve Chairman Warsh faces a situation where inflation has been above target for many years, and some officials favor raising interest rates. If his speech on Friday is hawkish, long-term yields may rise again, weakening the effectiveness of the Treasury's repurchase agreements. Traders are worried about interference between fiscal and monetary authorities, causing the risk premium for US Treasuries to rise instead.

Oil Market Hidden Dangers: The Hormuz and the Rebound of Inflation

Oil prices fell as details of sanctions remained unresolved, but the International Energy Agency stated it would not discuss a second release of strategic reserves. Actual traffic through the Strait of Hormuz remains far below normal levels, and the attacks on oil tankers in the Red Sea serve as a reminder of supply fragility. A renewed rise in energy costs would push up inflation, limiting the Federal Reserve's room for easing, thereby suppressing US Treasury prices and impacting gold. Traders need to distinguish between two scenarios: if oil prices decline moderately, both US Treasuries and gold could benefit; if oil prices surge, inflation expectations may dominate, and gold's safe-haven appeal may be suppressed by real interest rates.

The US dollar is caught between intervention and expectations of interest rate hikes.

Bessant attempted to support the yen through currency swaps to prevent Japan from selling off US Treasury bonds, but the effect was short-lived. The TGA repurchase news further weakened expectations of dollar credibility. On the other hand, if Warsh signals an interest rate hike, the dollar may receive support. The short-term direction of the dollar is unclear, but volatility is rising. Continued dollar weakness will further strengthen the logic of gold as an alternative asset.

Trend Outlook

In the short term, rumors of US Treasury repurchase agreements and the TGA (Treasury General Agreement on Treasury Bonds) may continue to support bond and gold prices, but the Bessant press conference tonight will be the first test: if the details fall short of expectations or the market interprets it as "unconventional intervention," sentiment may reverse. US Treasury volatility is likely to remain high ahead of Friday's Jackson Hole speech. Gold is showing resilience above its 200-day moving average, but the risk of a pullback due to rising oil prices pushing long-term yields higher should be noted. If fiscal intervention is seen as credible, gold and US Treasuries may experience a period of convergence; if the Fed is forced to turn hawkish, rising US Treasury yields will retest gold. Overall, the environment remains highly volatile, and sentiment management should be prioritized.

Frequently Asked Questions

What does the US Treasury repurchase agreement mean for the market? It indicates that the US Treasury wants to directly lower long-term interest rates, but the scale is relatively small compared to the existing debt, and it's more of a signal. If interpreted as "fiscal monetization," it could weaken the dollar's credibility and support gold. Was gold's break above the 200-day moving average caused by the bond-buying news? No. Gold prices had already risen above this moving average in the afternoon, and the TGA rumors in the evening only reinforced the same direction. Technical breakouts often bring short-term buying, but the 30- to 60-day window may be volatile. Why did Bessant's intervention trigger anxiety in the bond market? Because his previous bet on lower interest rates failed, and he used unconventional tools. The market is worried that direct government management of the yield curve will reduce the attractiveness of US Treasuries, instead demanding a higher risk premium. Why is this week's Jackson Hole meeting important? Fed Chairman Warsh will speak at the annual meeting for the first time, and the market wants to see his response to inflation, the possibility of interest rate hikes, and Treasury intervention. If he leans hawkish, long-term yields may rise again. What impact does crude oil have on US Treasuries and gold? Rising oil prices push up inflation, which may force the Fed to maintain or raise interest rates, thereby raising US Treasury yields and suppressing gold. However, gold could also benefit if geopolitical conflicts trigger safe-haven demand. Attention should be paid to the resumption of air traffic over the Strait of Hormuz and the implementation of sanctions.