Cryptocurrencies Could Stay Elevated in Wake of U.S. Treasury Intervention — Market Talk

1051 GMT - Cryptocurrencies could remain supported if U.S. Treasury yields continue to recover from a recent buyback announcement, Block Scholes analyst Thahbib Rahman says in a note. The Treasury last week announced increased buybacks of long-term bonds but this failed to have a lasting impact in lowering yields, he says. Should the impact of the Treasury's efforts to lower yields continue to fade, cryptocurrencies and gold could rise against a weaker dollar in debasement trades. These are where surging government debt causes investors to turn to other assets, he says. Bitcoin rises 0.2% to $77,571 after reaching a three-month high of $79,455 Friday. Ether gains 0.6% to $2,463 after hitting a six-month high of $2,545 Saturday. ([email protected])1034 GMT - While defense and investment spending by the German government has ramped up this year, levels remain below target, Sebastian Becker at Deutsche Bank says in a note. Germany's fiscal expansion is clearly gaining momentum, he says. The deficit stands at around 90 billion euros, roughly 50 billion euros higher than a year earlier, while defense spending has increased approximately 30%. However, underspending remains a key risk, Becker says. "Disbursements have been sluggish relative to the ambitious spending targets. While [year-to-date] spending levels are well above last year's figures, as of July less than half of the full-year spending targets have been reached," he says. Still, a large shortfall is unlikely, as spending tends to pick up toward year-end, he notes. ([email protected])1021 GMT - The forces pushing government bond yields higher are still not exhausted, Barclays analysts say in a research note. The 10-yearTreasury yield is essentially the market's estimate of the average federal funds rate over the next 10 years plus term premium, they say. "Investors have shifted significantly their thinking from 12 months ago, when the market expected policy rates to be much lower by now," they say. Economic growth has proven resilient, and inflation has been too sticky, and the artificial-intelligence capex cycle shows no sign of slowing. As a result, the market concludes that the long-run neutral rate, the theoretical interest rate that neither speeds up nor slows the economy, should be higher, they say. And the 10-year yield is simply adjusting to that reality. ([email protected])1009 GMT - Bitcoin is increasingly trading as both a risk-sensitive asset and a hedge against fiscal and monetary policy uncertainty, Zaye Capital Markets analyst Naeem Aslam says in a note. President Trump's comments about tariffs, Iran and larger household tax refunds reinforce broader concerns about inflation, government borrowing and geopolitical risk, he says. Those forces can support bitcoin's longer-term "hard asset" narrative. However, continued gains in bitcoin require real spot buying rather than forced liquidations once crowded bets on the cryptocurrency falling are exhausted, he says. "That makes institutional flows, regulatory progress and Treasury-market conditions more important than simply tracking momentum." Bitcoin rises 1.5% to $77,406 after reaching a three-month high of $79,455 on Friday, LSEG data show. ([email protected])1004 GMT - U.S. Treasury yields decline, helped by lower oil prices and prospects that the Treasury might act again to tame high yields. The dollar rises on safe-haven demand ahead of Treasury Secretary Scott Bessent potentially unveiling sanctions against Iran later Monday. Global bonds are enjoying a small rebound but remain vulnerable, Pimco's Marc Seidner and Pramol Dhawan say. "Rising sovereign debt loads, a surge in AI-related corporate bond issuance, and lingering inflation anxiety tied to energy costs--and what that means for central bank policy--all play a role." The 10-year Treasury yield declines 2.8 basis points to 4.709%, according to Tradeweb. The 30-year yield falls 2.6 basis points at 5.249%. The DXY dollar index rises 0.2% to 99.00. ([email protected])1000 GMT - Morgan Stanley raised its Brent crude forecast for the fourth quarter, saying it sees prices peaking at $100 a barrel as a slower Middle East supply recovery leaves the oil market in deficit through the first quarter of next year. "Crude is tightening. Recent weeks have seen one of the sharpest declines in oil-on-water, whilst onshore inventories are declining as well, including in China," analysts at the bank say. Morgan Stanley now expects the recovery in Middle East supply to extend well into 2027. Meanwhile, releases from the U.S. Strategic Petroleum Reserve are slowing and could end after September, while Chinese crude buying has stabilized and could strengthen, according to the bank. ([email protected])1000 GMT - Singapore's inflation was less hot than expected in July, but upward risks keep central bank tightening on the table, ING economists say. Energy-related costs are still driving inflation, and risks remain skewed to the upside, ING's Deepali Bhargava writes. Uncertainty around the U.S.-Iran conflict will likely keep global energy prices elevated, raising the possibility of further pass-through into Singapore's domestic goods and services prices. Households are also facing increases in electricity and gas tariffs. The El Niño weather effect could inflate imported food costs--an acute threat given Singapore's heavy reliance on food imports. Robust AI-related investment and data-center activity could add to services inflation. ING therefore thinks the central bank's October meeting remains live.([email protected])0952 GMT - Sterling should take direction from external drivers this week in the absence of notable U.K. data, Monex Europe analysts say in a note. This includes Treasury Secretary Scott Bessent potentially unveiling sanctions against Iran later Monday, oil prices and the Federal Reserve's Jackson Hole Symposium on August 27-29. "Beneath the surface, we continue to flag the U.K. autumn budget and [U.K. government-bond] market sensitivities as the key domestic risk to sterling's recent resilience, with fiscal credibility still the pound's soft underbelly." Sterling falls 0.1% to $1.3629 after reaching a six-month high of $1.3675 Friday as the dollar weakened, according to LSEG. The euro trades flat at 0.8558 pounds. Ten-year gilt yields fall 1.1 basis points to 5.045%, Tradeweb data show. ([email protected])0933 GMT - Schroders takes a neutral view on the U.S. Treasury yield curve and would welcome greater clarity sooner rather than later from Federal Reserve Chairman Kevin Warsh, says global fixed income strategist James Bilson in a note. "A more proactive Fed with stronger inflation-fighting credibility is a necessary component for a curve-flattening view, and that has become more questionable for the time being," he says. Schroders sees a strong case for a U.S. rate hike, but recent softer inflation data mean a September hike looks less likely, Bilson says. Money markets currently price in a 35% probability of a rate increase in September, while a 25-basis-point hike is fully priced for December, according to LSEG. ([email protected])0920 GMT - The Czech koruna reached a three-year high against the euro overnight. Commerzbank's Tatha Ghose says the currency offers the strongest near-term prospects compared to the Hungarian forint and Polish zloty. The koruna has a lower correlation to risk sentiment than its central European peers, leaving it less exposed to any renewed global risk aversion, he says in a note. Moreover, the Czech National Bank is the only regional central bank likely to raise interest rates in coming months, he says. Poland's central bank Governor Adam Glapinski recently indicated rate cuts could be near while Hungary's central bank is expected to lower rates on Tuesday. The euro rises 0.1% to 24.111 koruna after falling as low as 24.078 overnight. ([email protected])0902 GMT - Qatar's construction sector is expected to contract by 9.7% in 2026, a sharp downgrade from a pre-conflict forecast for 3.2% growth, BMI says. The revision reflects direct and indirect disruption from the U.S.-Iran conflict, including project suspensions, supply-chain strains, higher materials costs and weaker investment sentiment. BMI says a prolonged conflict or delayed reopening of the Strait of Hormuz would further pressure activity, while reduced LNG processing capacity could weigh on government revenues and construction spending. The research firm expects growth to recover to 6.7% in 2027 if hostilities ease and Hormuz partially reopens. ([email protected])0858 GMT - The Monetary Authority of Singapore's current policy stance appears to be in a good place to manage inflation amid a resilient economy, DBS senior economist Chua Han Teng says in an email. Headline inflation accelerated in July, rising 2.2% from a year earlier compared with June's 1.9% increase, driven mainly by the delayed pass-through of higher global energy costs. Policymakers expect domestically driven price pressures to remain contained, he notes. However, they are also wary of the risk that strong technology-led economic growth could generate stronger demand and push up wages, which may influence future monetary policy decisions. ([email protected])