Bitunix Analyst:The Yield Curve Approaches Inversion—TGA and Fed Tools Become the New Focus of the Treasury Market

September 23 — The U.S. Treasury is studying whether to inject part of the Treasury General Account (TGA) cash into the private repo market. The TGA currently stands at nearly $1 trillion, though the specific amount and frequency have not yet been determined. If the plan is implemented, fiscal cash would no longer merely sit in the Fed's account but could directly enter the money market and be converted into bank reserves, providing additional liquidity for Treasury trading and short-term financing. The market is therefore paying more attention to whether the operational rules are predictable and whether the TGA has a clear trigger threshold, so as to avoid fiscal cash itself becoming a new source of liquidity volatility.

The importance of this discussion lies in the fact that the U.S. bond market is currently in a phase of repricing interest rates and liquidity. The spread between 2-year and 10-year U.S. Treasury yields has narrowed to about 22 basis points, and the market is once again discussing the significance of the yield curve approaching inversion; but unlike in the past, a flattening curve does not necessarily equate directly to a recession signal. More importantly, it reflects the market's reassessment of inflation, the policy rate, and long-term financing demand. At the same time, the New York Fed emphasizes that the ample reserves framework and repo tools can still effectively control short-term rates, meaning the Treasury and the Fed are maintaining market functioning from different levels. Gold presents another notable pricing change. The U.S. 10-year real yield has risen to 2.63%, a more than 20-year high, yet gold ETF holdings have instead rebounded to a 7-month high, showing that gold's traditional sensitivity to real rates is declining. Behind this, in addition to continued central bank gold purchases, it may also reflect that investors are beginning to interpret rising long-end yields as fiscal deficits, debt costs, and financial stability risks, rather than merely the opportunity cost of holding gold. If global liquidity improves and fiscal risks exist at the same time, gold's pricing logic may gradually extend from an "interest rate trade" to a "liquidity and credit risk trade."

Therefore, what is truly worth observing now is no longer the price of a single asset, but whether fiscal cash, central bank reserves, and long-end rates are forming a new policy transmission chain. If TGA funds can provide repo market liquidity in a rules-based manner, it may help ease pressure in funding markets in the short term; but in the long term, U.S. debt supply, fiscal financing needs, and real rates still determine the cost of capital. This also explains why, even though large U.S. tech stocks remain supported by AI investment, rate-sensitive sectors such as financials and utilities have already come under pressure first, while gold is gradually showing resilience different from past cycles.