"Bessent's Bond Buyback Strategy May Be Linked to Trump's Cryptocurrency Policy"

AP Yonhap News

The Wall Street Journal (WSJ) reported on the 24th (local time) that the U.S. Treasury’s long-term government bond buyback policy may be implemented in conjunction with U.S. President Donald Trump's cryptocurrency policy. According to the analysis, stablecoin issuers are expected to purchase additional short-term bonds, which will be issued by the Treasury for the buyback, as collateral assets, thereby linking these two policies.

According to WSJ, the U.S. Treasury is planning a strategy called the ‘Treasury Twist’ to stabilize yields on U.S. long-term government bonds, such as the 30-year Treasury. This strategy involves issuing and selling short-term Treasury bills (T-bills) and then repurchasing long-term Treasuries with the proceeds. U.S. Treasury Secretary Scott Bessent gave it its name, noting its similarity to ‘Operation Twist,’ a monetary policy in which the Federal Reserve sells short-term government bonds and purchases long-term ones to lower long-term rates.

As long-term interest rates have surpassed 5%, sparking concerns about a widening government deficit, the plan is to issue short-term securities and use the proceeds to buy back long-term bonds (buyback), thereby lowering rates. The key point here is securing sufficient demand for a large-scale purchase of short-term securities, and WSJ reported that stablecoin issuers are expected to emerge as major buyers.

WSJ cited the passage of the “GENIUS Act,” which took effect last month on the 18th under the Trump administration. This law requires stablecoin issuers to hold ultra-short-term U.S. government bonds with maturities of 93 days or less as collateral assets. Secretary Bessent has previously predicted that the stablecoin market will support demand for U.S. Treasuries.

In June last year, he stated via the social media platform X that “as the stablecoin ecosystem grows, demand for U.S. Treasuries, which serve as collateral, will also increase,” adding that “the stablecoin market will grow to $3.7 trillion (about 5,113 trillion won) by the end of 2030, and the resulting demand for government bonds will help lower government borrowing costs and curb national debt.” Citigroup’s Citigroup Research Institute also stated in a recent report that, “In an optimistic forecast, if the stablecoin market grows to $4 trillion by 2030, it could absorb more than one-quarter of the total amount of U.S. government bonds.”

The previously sluggish virtual asset market is now volatile. According to CoinMarketCap, a virtual asset price tracking website, the price of Bitcoin on this day rose to $78,962, approaching the $80,000 level. It has risen 22.51% over the past week.

However, some analysts say that the stablecoin market may not grow as actively as the U.S. Treasury anticipates. WSJ noted, “It is not yet certain whether the stablecoin market will fully break out of its stagnation, nor whether the resulting demand for government bonds will be enough to actually lower government fundraising costs,” adding, “If the stablecoin market is to grow more than tenfold from its current size, it may take longer than President Trump’s term in office.”

This content was produced with the assistance of AI translation services.