The Treasury’s move to expand liquidity support for longer-dated securities spurred a rally in gold and weighed on the dollar.
The US Treasury announced it will at least double the size of its liquidity-support buyback operations for longer-dated securities, raising the maximum from $2 billion to $4 billion per operation. The decision immediately supported the long end of the Treasury curve and lifted precious metals while pressuring the dollar lower.
The move follows a session marked by thin data and limited news flow, with the Treasury’s announcement providing the primary catalyst. While not equivalent to quantitative easing, the action eases financial conditions, countering recent tightening that had constrained inflation dynamics.
Markets also digested FOMC minutes revealing a hawkish tilt among participants, who signaled higher rates may be needed if inflation persists. The Canadian dollar surged to new highs on the back of the Treasury’s announcement and reports of a US-Canada trade deal.