Article
Bitunix analyst: The yield curve is approaching inversion, while the TGA and Fed tools become new focal points for the US Treasury market
BlockBeats reported on September 23 that the US Treasury is studying whether to place part of the Treasury General Account (TGA) cash into the private repo market. The TGA currently holds nearly US$1 trillion, while the specific amount and frequency have yet to be determined. If implemented, fiscal cash would no longer remain solely in the Fed's account but could enter the money market directly, being converted into banking-system reserves and providing additional liquidity for Treasury trading and short-term financing. The market is therefore paying closer attention to whether the operating rules will be predictable and whether the TGA will have clear activation thresholds, so that fiscal cash itself does not become a new source of liquidity volatility.
The importance of this discussion lies in the fact that the US bond market is currently undergoing a repricing of interest rates and liquidity. The spread between 2-year and 10-year US Treasury yields has narrowed to approximately 22 basis points, prompting renewed discussion of the significance of a yield curve nearing inversion. Unlike in the past, however, a flattening curve does not necessarily directly indicate a recession; more importantly, it reflects the market's reassessment of inflation, policy rates, and long-term financing demand. Meanwhile, the Federal Reserve Bank of New York has emphasized that the ample-reserves framework and repo tools remain effective in controlling short-term interest rates, indicating that the Treasury and the Fed are maintaining market functioning from different angles. Gold presents another noteworthy pricing shift. The US 10-year real yield rose to 2.63%, its highest level in more than 20 years, yet gold ETF holdings rebounded to a 7-month high, indicating that gold's traditional sensitivity to real rates is declining. In addition to continued central-bank gold purchases, this may also reflect investors beginning to interpret rising long-end yields as a sign of fiscal deficits, debt-servicing costs, and financial-stability risks, rather than merely as an increase in the opportunity cost of holding gold. If improved global liquidity and fiscal risks coexist, gold's pricing logic may gradually extend from an “interest-rate trade” to a “liquidity and credit-risk trade.”
Therefore, what is truly worth watching now is not the price of any single asset, but whether fiscal cash, central-bank reserves, and long-end interest rates will form a new policy transmission chain. If TGA funds can provide repo-market liquidity in a rules-based manner, they may help reduce money-market stress in the short term. Over the long term, however, US debt supply, fiscal financing needs, and real interest rates will continue to determine the cost of capital. This also explains why, even as large-cap US technology stocks remain supported by AI investment, rate-sensitive sectors such as financials and utilities have come under pressure first, while gold is gradually demonstrating resilience different from that seen in past cycles.