Market update - October 8th, 2026

Flows cooled, long yields hit a two-decade high, and Bitcoin ground higher

Digital asset fund flows have lost momentum over the 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 we also believe 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 The Treasury has not stopped intervening, but the response has not intensified as yields have climbed. 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. Treasury Secretary Scott Bessent has also softened his rhetoric, acknowledging that Treasury cannot simply control the bond market and pointing instead to higher oil prices as an important driver of the rise in yields.

The Fed is being pulled in two directions

Monetary policy signals have meanwhile remained unusually mixed. Some Fed officials continue to emphasise elevated inflation, while others have highlighted 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. Despite that move, markets still expect inflation rather than employment to determine the next major policy decision.

That helps explain why the weaker employment picture has not produced a more decisive rally in Bitcoin. Economic activity remains comparatively resilient: PMIs this week have continued to point to expansion, while consumer spending and other activity indicators have held up better than the labour data might suggest.³ At the same time, energy prices remain elevated, partly because of the Iran conflict, leaving the Fed with an uncomfortable combination of softer employment and persistent inflation pressure.

In our view, the absence of flow momentum reflects uncertainty rather than deteriorating fundamentals. Investors are trying to reconcile three conflicting signals: weaker employment, stubborn inflation and an increasingly uncomfortable fiscal position.

Why the bond market may matter more than the Fed

Of those three, the bond market may ultimately 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 those yields 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 yet. The labour market is weakening, growth is holding up and inflation remains the Fed’s primary concern. That combination has been enough to keep Bitcoin moving gradually higher. What would turn a grind into a breakout is flows following the fiscal argument rather than the rate argument, and that is the number to watch over the coming weeks.

Sources:

1.  US Department of the Treasury, Daily Treasury Par Yield Curve Rates, October 2026

2. US Department of the Treasury, buyback operation announcements, August to October 2026

3. S&P Global, US PMI, October 2026