Bitcoin faces a $25B Treasury test after demand for US debt weakens

Treasury's Nov. 10 sale of $42 billion in 10-year notes drew weaker bid coverage and indirect participation than October's auction, despite clearing at a lower yield. That leaves Bitcoin investors watching whether today's long-bond sale makes financing more expensive.

Treasury has scheduled a $25 billion sale of 30-year bonds for Nov. 12 at 1 p.m. Eastern. Its result will offer another reading on demand for long-term government debt.

The November 10-year auction cleared at a high yield of 5.02%, down from 5.3% at October's reopening. But its bid-to-cover ratio fell to 2.46 from 2.77, indicating less bidding relative to the amount awarded. The yield measures the return accepted by buyers; coverage describes the volume of bidding.

Indirect bidders received about 61.2% of November's competitive awards, compared with 80.3% in October. These shares exclude noncompetitive allocations and Federal Reserve add-ons.

The size comparison matters. October's $39 billion sale reopened the August note, while November offered a new security. August provides a same-size comparison: its $42 billion new issue drew 2.53 bid coverage and approximately 76.7% indirect participation. It cleared at 4.68%, below November's yield.

November drew weaker participation on both measures against each comparator. August matches its offering size and new-issue status, although the securities and market conditions differ.

The November sale was fully subscribed. Indirect bidding also cannot establish foreign capital flight: Treasury's bidder definitions include domestic and foreign customers placing orders through intermediaries.

How financing conditions could reach Bitcoin

If weaker bond demand translates into higher long-term yields and tighter financing, investors could have less room in their risk budgets for crypto exposure. Firmer demand and stable financing would weaken that channel of concern.

The authors of a 2023 IMF working paper found that U.S. monetary tightening reduced a broad crypto price factor through investor risk-taking. The study examines monetary tightening, rather than the effect of a single Treasury auction.

The financing timetable also limits the cash interpretation. The 30-year auction settles Nov. 16, alongside the other November refunding securities. Treasury's $125 billion refunding replaces approximately $97 billion of privately held maturities and raises about $28 billion in new private cash. The bond sale's $25 billion headline amount is gross issuance, rather than wholly new borrowing.

Today's test is whether buyers return for the 30-year sale, and whether yields rise if demand disappoints.