US Treasurys will turn into a macro narrative with the potential to sway crypto markets. US Treasury auctions may lead to a record supply in 2025, with implications for all other markets.
US Treasurys may reach a record supply in 2025, based on planned auctions . In 2025, predicted Treasury placements may reach $31T, including refinancing and new emissions. The sheer scale of the US bond market will invite constant monitoring in 2025 for its effect on international finance.
The US debt is over $36T, requiring new US Treasury issuance of over $31T in 2025. | Source: Fiscal Data
The record issuance coincides with the need to service the peak US national debt of $36.21T. The projected issuance of $31T in US Treasury bonds makes up 109% of the projected US GDP for the current year. The debt is also equivalent to 140% of the M2 broad money supply.
Those near-record ratios of debt to GDP and M2 signal the outstanding effect of this year’s Treasury auctions. Binance’s research focused on potential foreign demand, as usually around 30% of auctions go to foreign buyers.
As the USA changes its roles in both economy and geopolitics, the foreign demand component will be a big unknown for the bond market.
High yields can hamper the crypto market
The crypto market has shown a positive reaction during historical periods of M2 growth. However, debt issuance at this scale is a new challenge for investors.
The record issuance may lead to increased yield, which would be attractive for buyers seeking risk-free assets. While crypto has higher growth potential and unexpected rallies, bond yields can help offset some of the uncertainty.
However, too much yield can lead to a Fed intervention of printing more money, which would be good news for high-risk assets. So far, Bitcoin (BTC) has performed its biggest rallies during predominantly low interest rates.
Binance’s research views crypto as the ultimate risk asset, which would usually move opposite to fixed income instruments. The bond market is closely watched for runaway yields, especially following the recent stock market crash. In the worst-case scenario, crypto may face another global financial crisis, and show its role either as a store of value or as a source of speculation.
US Treasury debt tokenization expands to $5.9B
US Treasury debt is one of the key components of the crypto market. Debt tokenization has expanded rapidly in the past year, reaching a total of $5.9B .
The tokenized debt supports both asset-backed and algorithmic stablecoins as a reliable asset. Yield is also the main source of earnings for Tether Inc. the issuer of USDT.
Due to the large number of RWA token holders, higher yields may become a net positive for the crypto market. The high yield and record available auctions may be a chance for crypto companies to lock some of their gains and benefit from the higher yields.
The crypto market often relies on short-term bills and notes. For now, crypto projects are avoiding long-term bonds, aiming for a more agile yield strategy.
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