Bond Market Shock: How Did a Repo Ignite Gold and Bitcoin?

By: Xiao Bing

On August 18, the US 30-year Treasury yield touched 5.337% intraday, creating a new high since April 2007. The last time this number appeared on the screen, the iPhone had just launched, and Lehman Brothers was still a Wall Street giant.

In less than 24 hours, the Treasury Department moved.

On August 19, the US Treasury Department announced it would at least double the scale of liquidity support repo operations for long-end nominal Treasuries, increasing the single operation limit from $2 billion to no less than $4 billion, covering two ranges of 10-to-20-year and 20-to-30-year, effective September 9, lasting until November 4.

Within minutes of the news landing, the 30-year yield plummeted from near 5.337% to 5.192%, a drop of about 15 basis points. Gold surged over $125 in a single day to $4,487/oz, creating a new high since June 4. Bitcoin rose from an intraday low of $64,112 to $69,700, an 8.7% increase, approaching the $70,000 threshold for the first time in two months. Ethereum rose nearly 19%, crypto market liquidations exceeded $2 billion in 24 hours, with short liquidations at $1.44 billion.

How did a repo operation trigger a global market shock?

What is a Repo?

Treasury repos are a different matter from the Fed's QE.