US Treasury Could Shift Debt Strategy, Impacting Crypto Markets

Citigroup predicts the US Treasury will reduce long-term bond sales by $3 billion for both the 20-year and 30-year maturities, while increasing borrowing through short-term bills. The bank suggested the 20-year bond might be eliminated entirely, with an announcement possible on November 4.

No official confirmation of any change has come from the Treasury. Short-term bills are currently cheaper to issue, but they must be refinanced within a year, leaving the government exposed to whatever interest rates investors demand at that time.

Why Is the Treasury Shrinking Its Long-Term Debt Sales?

Long-term borrowing expenses are near their highest levels in decades. The 10-year yield closed at 5.24% on October 9, and the 30-year yield stood at 5.60%, according to Treasury data.

On October 1, the 10-year yield reached its highest point since April 2002. That same day, the Treasury used its full $6 billion bond buyback limit to repurchase older long-term debt.

In September, Treasury Secretary Scott Bessent had already challenged bond traders.

“I am the house now. … You can bet against me if you want,” he said.

Despite this, yields continued to rise. According to Bloomberg, Citi's forecast is that Bessent will respond by selling fewer long-term bonds.

What Shorter Borrowing Means for Interest Costs and Crypto

Short-term bills are more affordable at present. On October 9, the 3-month yield was 4.25%, significantly lower than the 30-year rate.

However, the national debt surpassed $40 trillion in August, and annual interest payments already amount to roughly $1.1 trillion, based on Treasury data.

Strategists at BNP Paribas are skeptical that this shift would reduce government borrowing costs. In August, Kevin Flanagan, head of investment strategy at WisdomTree, raised concerns about the arithmetic.

“It seems to me mathematically very difficult to cut issuance at the longer end of the curve and make it up elsewhere,” Bloomberg reported, citing Flanagan.

Crypto traders are already feeling the impact of rising yields. Bitcoin (BTC) saw a pullback when the 10-year yield hit its 2002-level high, and it now trades at $84,030, up 1.2% in the past 24 hours, influenced by recent comments from US President Trump.

The next key indicator will come from a Treasury survey of bond dealers next week. The November 4 refunding statement will then reveal whether Washington shifts toward shorter-term borrowing and how long-term yields react.