Former BitMex CEO Arthur Hayes has put forward some predictions regarding the upcoming US Treasury policy actions under Secretary Janet Yellen. Hayes believes that these actions could have a significant impact on the liquidity landscape, potentially leading to rallies in both the crypto and stock markets.
According to Hayes, it is essential for the market to shift its focus away from the Federal Reserve’s policy decisions and instead pay attention to the Treasury’s upcoming actions. He outlined three potential scenarios that the Treasury could pursue next week, each of which has the potential to inject high levels of liquidity into the markets.
One scenario that Hayes proposed involves the Treasury halting the issuance of new Treasury bonds and instead utilizing the balance in the Treasury General Account (TGA). This move could inject around $1 trillion into the market, potentially lowering interest rates and stimulating economic activity.
Another scenario suggested by Hayes is a shift towards short-term borrowing through Treasury bills. This move could provide an additional $400 billion boost in market liquidity by reducing the balances held in the Reverse Repurchase Agreement facility.
The most dramatic scenario combines the first two, where the Treasury would stop issuing long-term bonds and aggressively draw down both the TGA and RRP balances, releasing a total of $1.4 trillion into the financial system.
Hayes emphasized the crucial role that Yellen plays in these potential developments, noting that her decisions could have a significant impact on market forces. He predicted that any of these strategies being implemented could boost stock markets and lead to a resurgence in the already bullish crypto market.
While some analysts share Hayes’ enthusiasm for these liquidity measures, others have raised concerns about potential unintended consequences such as inflation or increased market volatility. As the date for the Treasury’s next quarterly refunding announcement approaches, the financial community is closely watching for any signs that Yellen may adopt these unconventional strategies. The decisions made by the Treasury in the coming weeks could set precedents for how national economic policies can influence global financial markets in significant ways.
