The Treasury's sedative failed, and only bitcoin took off

Good morning. On Friday, the last session of the week, US stocks rebounded for a day, but the three major indexes still ended the week lower. The real star of the week was Treasuries: despite the Treasury's expanded buybacks, the 30-year yield rose again and sits near a multiyear high.

The side effects are the bigger problem. Once the government stepped in, the market began expecting even more inflation, and inflation expectations climbed to their highest in two months. The dollar weakened too. One JP Morgan executive likened it to paying off a mortgage with a credit card, meaning the problem was postponed, not solved. Some also argue that such an active Treasury has left the Fed in an awkward spot.

Bitcoin took off in the confusion. It jumped more than 9% on Friday alone, touching 79,455 dollars, and gained 24% for the week, its best since 2023. Many in the industry say the move owes less to crypto news than to rates and a weaker dollar. Interestingly, prediction-market traders expect bitcoin to finish the year near today's price.

Next week has two big events. Fed Chair Warsh speaks at Jackson Hole, and the PCE inflation gauge the Fed watches closely is due. After July's minutes showed growing support for a hike, investors will be parsing the speech for any hint on whether and when. Nvidia reports earnings the same week.