Rumors of the "Death" of U.S. Treasuries Are Greatly Exaggerated
· by Konstantin Shvarts
In recent days, we've seen a wave of dramatic headlines proclaiming the "end of the dollar," "the party is over," and "a new era of hyperinflation is upon us." But let's take a closer look at the facts.
The recent volatility in the long end of the U.S. Treasury yield curve was largely driven by technical issues — namely, weak auctions of Japan's 40-year bonds and the U.S. 20-year Treasury bonds.
However:
- Rising yields in Japan do not directly impact inflation in the U.S.
- The 20-year U.S. Treasury bond has never been particularly popular. Investors tend to prefer the 10-year as a benchmark or the 30-year for institutional duration strategies. The 20-year simply never gained much traction.
At the same time, the U.S. Treasury remains fully committed to maintaining stability in the debt market — managing issuance, duration, and demand with precision. Let's not underestimate their tools and determination.
But here's a fact that has flown under the radar:
On May 12, with little media attention, the U.S. Congress passed a bill on stablecoins called GENIUS. As is often the case, the most important developments happen quietly.
The bill passed with a significant majority — 66 to 32, indicating bipartisan support.
One key provision: all dollar-denominated stablecoins offered in the U.S. must be backed 1:1 by reserves held in cash or U.S. Treasury securities.
This could generate hundreds of billions — even trillions — of dollars in additional demand for Treasuries, more than enough to cover the U.S. budget deficit for the years ahead.
Perhaps that's why Donald Trump recently declared a "crypto-friendly" policy direction for the United States.
So before you rush to sell your Treasuries, consider this:
The party might just be getting started.