The widening of the United States fiscal deficit and the rise in the scale of the country's debt are pushing the so-called “currency devaluation deal” on Wall Street back up. The direction of the market bets is clear: gold and bitcoin are strong, the dollar is falling, and long-term United States debt is under pressure.

Ministry of Finance plus Treasury Debt Repurchase

Last week, the United States Treasury Department indicated that it would increase the single-purchase cap on government debt from $2 billion to at least $4 billion. Two senior officials of the Ministry of Finance subsequently stated that the Ministry might also use general account funds to support the arrangement.

This move is taking place in two contexts: in July, the monthly budget deficit in the United States rose to five years of high, with total federal debt reaching $40 trillion. The Minister of Finance, Scott Besente, has previously indicated that the Ministry of Finance has “many tools” at its disposal to stabilize the national debt market.

The market is more concerned not with the size of the buyback itself, but with the signal it sends. Encrypted ETF Issuer 21 Shares Macro Manager Stephen Coltman states that the current published purchases are not large compared to the market as a whole, but have a strong signal effect.

Gold and bitcoin are getting better.

In such transactions, investors usually turn to assets, including precious metals and encrypted assets, that are considered to be more able to reverse the purchasing power of the currency.

Gold rose to three months on Monday, the previous week had risen by more than 5 per cent. On a monthly basis, the August gold price is expected to record the largest single-month increase since 1999 and has risen for five consecutive weeks.

Bitcoin's up 2% Monday, up to the top since May. The cumulative increase over the previous three days was 22 per cent, the largest three-day increase since 2023. On Tuesday in Asia, bitcoin touched $80,000.

In contrast, the United States dollar continues to weaken. The United States dollar index, which measures the performance of the United States dollar against the six major currencies, fell to a low of almost three months last week, falling three weeks in the last four weeks, and is almost flat on Monday.

Long-end returns are still high.

Despite the Ministry of Finance ' s return, the United States debt market was not significantly calm. Last week, the long-term US debt return went up at a fast pace, with 30 years of US debt return approaching 5.34 per cent, approaching a 20-year high, significantly above 4.82 per cent at the end of June.

After the repurchase news was released, the returns rebounded first, indicating that bond investors did not consider existing measures to be sufficient to relieve pressure. Nohshad Shah, Director of Fixed Proceeds Sales, argued that such operations might support the debt market for a short time, but could also further depress the dollar and increase inflationary pressure.

He indicated that if the dollar continued to weaken and financial conditions eased, the Fed might be forced to maintain a tighter policy. According to CME Fed Watch data, the market currently expects the Fed to increase interest rates by approximately 56 per cent in October, an increase of over 7 percentage points over a week ago.

Wall Street is still divided.

Some agencies believe that there is room for continuity in this round of transactions. Deutsche Bank analyst Michael Hsueh said that the price of gold could even exceed its target of $4,800 per ounce, and that the change in Treasury policy reinforced its judgement that it was rich in gold.

Dario, founder of the Bridge Water Foundation, also said that the financial position of the United States Government was at a turning point and that if the problem was not addressed as soon as possible, debt could accumulate to a point where it would be difficult to resolve without paying a huge price.

However, investors also believe that it is too early to fully accept the logic of “currency devaluations”. Alexander Lis, Chief Investment Officer of the Société d'Investment, stated that it remained to be seen whether the deal would continue unless it was confirmed that the Fed was cooperating with the Treasury.