Key Takeaways
- US producer inflation strengthened the case for another Fed hike. August PPI rose 5.4% year over year, while markets lifted the probability of a September 25-basis-point hike to around 70%, from 62% before the report.
- Bitcoin is being squeezed by a broader bond-market selloff. BTC fell below $77,000 as the 10-year Treasury yield surged to 4.96%, nearing the critical 5% level, while the 30-year yield reached its highest since 2007.
- Bessent’s larger Treasury buybacks have failed to contain yields. The Treasury bought back about $5.2 billion of long-dated debt, but yields continued to rise, suggesting inflation, oil prices, and fiscal concerns are outweighing efforts to ease long-term borrowing costs.
Bitcoin slipped below $77,000 on Thursday as hotter US producer inflation pushed Treasury yields toward 5% and strengthened expectations that the Federal Reserve could raise interest rates at its September meeting.
The US Producer Price Index rose 0.4% in August from the previous month, while the annual rate accelerated to 5.4%, slightly above the 5.3% consensus estimate.
Energy prices jumped 4.2% during the month, adding to concerns that higher oil prices could keep inflation elevated for longer.
Core producer inflation also remained elevated. The latest data showed underlying price pressures accelerating from July, adding another complication for the Fed just days before its Sept. 15-16 policy meeting.
Bitcoin, along with other risk assets, dropped below $77,000 around the US market open. The decline came as the 10-year Treasury yield climbed above 4.9%, while the 30-year yield reached its highest level since 2007.
Markets Reprice Fed Hike After PPI
The PPI report triggered an immediate reassessment of the Fed outlook.
Traders raised the probability of a 25-basis-point increase at next week’s meeting to around 70% following the data, from roughly 62% beforehand, according to LSEG interest-rate pricing. At one point immediately following the release, market-implied odds climbed as high as 74%, while the probability of at least one increase by October reached 82%.
That shift matters for Bitcoin because higher interest rates and rising Treasury yields increase the relative attractiveness of government debt while tightening financial conditions for risk assets.
Economist Mohamed El-Erian highlighted an important detail in the market reaction. Although the monthly PPI reading and initial jobless claims were broadly in line with consensus expectations, the sharp rise in Treasury yields suggested investors had been positioned for softer inflation data.
The bond market response became increasingly pronounced through Thursday. The 10-year Treasury yield climbed to around 4.92% and traded even closer to 5% later in the session, while the 30-year yield rose above 5.35%.
For Bitcoin, the combination of higher real and nominal yields and expectations of tighter monetary policy poses a potentially greater risk than the headline PPI itself. Bitcoin has already struggled to regain momentum around $80,000, leaving it vulnerable if investors continue reducing exposure to risk assets.
Bessent’s Bigger Treasury Buyback Fails to Stop Yields Rising
The selloff is particularly notable because the US Treasury is simultaneously attempting to improve conditions in the long-term government bond market.
Treasury Secretary Scott Bessent‘s department increased the maximum size of its latest buyback of Treasuries maturing in 10 to 20 years to $6 billion, three times the previous $2 billion maximum. The Treasury ultimately accepted approximately $5.2 billion of bonds in Thursday’s operation.
Yet yields continue to rise.
The 10-year yield moved to around 4.95% following the operation, while the 30-year yield reached approximately 5.37%, its highest level since 2007. The reaction suggests that a larger official buyer has so far been unable to overcome the forces driving investors away from longer-duration government debt.
Market commentator Lukas Ekwueme argued that the continued rise in yields despite larger Treasury buybacks illustrates how difficult it has become for policymakers to suppress long-term borrowing costs.
His broader characterization of Federal Reserve Treasury purchases as effectively resembling quantitative easing is more contentious, but the underlying bond-market concern is increasingly visible: official purchases have not been sufficient to reverse the selloff.
Economists and bond strategists have offered a similar warning without making the QE comparison.
Padhraic Garvey, ING’s head of global rates and debt strategy, described the $6 billion buyback as potentially just an “opening gambit,” noting that some investors had expected an operation as large as $10 billion.
Tony Miano of Wells Fargo Investment Institute said Treasury buybacks were unlikely to materially overcome the forces pushing yields higher, including widening federal deficits, sticky inflation, and increased global bond issuance.
Goldman Sachs has reached a similar conclusion, arguing that changing the maturity composition of government debt does not eliminate the government’s underlying borrowing requirements.
The bank sees the orderly rise in yields as reflecting economic and fiscal fundamentals rather than simply a malfunctioning Treasury market.
Bitcoin Now Faces a Bigger CPI Test
The next major catalyst comes Friday with the August Consumer Price Index, the final major inflation report before the Fed’s decision.
The stakes have increased considerably following PPI. Another stronger-than-expected inflation reading could reinforce expectations for a September hike and potentially push the 10-year Treasury yield through 5%.
Oil is adding another complication. Rising energy prices were already a major contributor to August producer inflation, while the latest geopolitical escalation has pushed crude sharply higher.
Because August inflation data largely predates September’s latest energy shock, policymakers also have to consider price pressures that have yet to be fully reflected in official inflation figures.
Bitcoin therefore enters the CPI release with considerably less macroeconomic support than it had only days ago. BTC’s move below $77,000 shows that crypto is already responding to the repricing in bonds and rates.
A softer CPI reading could ease yields and reduce expectations for immediate Fed tightening. But if consumer inflation confirms the signal coming from producer prices, the combination of a possible September hike, a 10-year Treasury yield near 5% and persistent energy-driven inflation could increase the probability that Bitcoin’s latest decline develops into a broader selloff rather than another short-lived pullback.
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Dr. Guneet Kaur is a senior editor at CCN.com and a Science Fellow at Exponential Science. She is a fintech and blockchain expert with extensive experience in digital finance education, blockchain ecosystems, and cryptocurrency markets. She has worked with global media such as Cointelegraph, as well as education and blockchain platforms, to design and lead strategic content and learning initiatives. As an educator and assessor for top-tier executive programs, she bridges real-world fintech trends with academic insight.
Dr. Kaur is also a published researcher and peer reviewer across fintech and data science journals, including Financial Innovation Journal and International Journal of Big Data Intelligence and Applications. Her work spans data-driven analysis, Web3 innovation, and technical content development. With a strong foundation in both industry and academia, she translates complex financial technologies into practical applications, empowering learners, professionals, and institutions across the rapidly evolving digital finance landscape.
