Digital asset fund flows across all issuers lost momentum this week, a marked slowdown after US$11.1B of inflows since mid-July. Much of that earlier demand appears to have reflected investors buying at depressed valuations, though concerns around US fiscal sustainability have become an increasingly important part of the allocation case.
The Treasury is intervening, and it is not working
Treasury yields have continued to rise despite the government’s expanded long-end buyback programme, with 10-year yields moving above 5.3% and 30-year yields reaching 5.7%, their highest levels in more than two decades.1 Long-end liquidity-support buybacks were doubled in August to at least US$4B per operation and remain in place through early November.2 The limited effect on yields reinforces the sense that investors are focused on the underlying fiscal position rather than on short-term market support.
The Fed is being pulled in two directions
Policy signals remain unusually mixed. Some Fed officials continue to emphasise elevated inflation, others growing downside risks from the labour market. September payrolls were considerably weaker than expected and pushed the implied probability of an October hike down to 23%, from 71% three weeks ago. Markets still expect inflation rather than employment to determine the next major policy decision.
That helps explain why weaker employment has not produced a more decisive rally in bitcoin. Activity remains comparatively resilient, with PMIs this week continuing to point to expansion.3 Energy prices also remain elevated, leaving the Fed with an uncomfortable combination of softer employment and persistent inflation pressure.
Why the bond market may matter more than the Fed
Investors are reconciling three conflicting signals: weaker employment, stubborn inflation and an increasingly uncomfortable fiscal position. Of those, the bond market may prove the most important. September was the worst month for US government bonds in four years, with the 10-year yield rising by more than 50 basis points. Higher yields would normally be a headwind for bitcoin through tighter financial conditions. But if they increasingly reflect concerns about the sustainability of US public finances rather than stronger growth, the interpretation changes. Bitcoin begins to look less like a conventional risk asset and more like an alternative to government-issued money.
The market has not resolved that question. For advisors, the number to watch is whether flows begin following the fiscal argument rather than the rate argument.
Sources
- US Department of the Treasury, Daily Treasury Par Yield Curve Rates, October 2026
- US Department of the Treasury, buyback operation announcements, August to October 2026
- S&P Global, US PMI, October 2026
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