Bitunix Analyst:CPI Gives Markets Breathing Room—But High Deficits,the Yen,and Energy Risk Keep Pushing Long-Term Cost of Capital Higher

BlockBeats News,August 13—US July CPI printed +0.1% month-on-month and +3.4% year-on-year, with core CPI running at 2.5% YoY. The overall inflation reading was moderate, with lower energy prices offsetting part of the upward pressure from housing costs. Following the release, market pricing for a September Fed hike fell from roughly 50% to around 40%, giving short-term policy pressure some room to ease.

But this CPI print is not enough to translate directly into easing expectations. The US fiscal deficit continues to widen, with the first ten months of the fiscal year now showing a cumulative deficit of roughly $1.8 trillion, national debt approaching $40 trillion, and interest expense continuing to climb. Against this backdrop, the US will need to keep issuing large volumes of Treasuries—and the latest 10-year Treasury auction yield rose to its highest level since 2007, with 30-year yields now approaching 5.25%. Long-end cost of capital is being driven jointly by fiscal supply, inflation stickiness, and market risk premium.

The critical question in the US rate market is therefore no longer just whether the Fed hikes in September—it is whether, even with the Fed on hold, long-end yields will continue to climb on the back of fiscal deficits and Treasury supply. This means financial conditions may not necessarily improve in step with policy rate cuts. For high-valuation and high-leverage assets, long-end yields remain a critical source of pressure.

In Asia, the yen has again approached the 160 line. Japan's July PPI printed at 7.2% YoY, lifting expectations that the BOJ may hike in September. Should Japanese monetary policy normalize further—and should the US-Japan yield differential narrow—global capital allocation and yen carry trades could both be affected.

Gold has benefited from receding hike tail risk, a weaker dollar, and renewed fiscal uncertainty support—but the current move looks more like a tactical rebound driven by rate expectations than a clean rate-cut trade. The Jackson Hole meeting, along with inflation and employment data ahead, will still determine whether gold's rally can extend.

Separately, the Russia-Ukraine conflict is once again bringing energy and food supply risk back to global markets. Russia and Ukraine have continued to strike Black Sea ports, energy facilities, and commercial vessels—with Ukraine now in its peak food export season. Further disruption to Black Sea shipping could push wheat and related food prices higher, further complicating an already-elevated energy inflation risk.

On balance, July CPI has lowered the pressure on the Fed for an immediate hike, but it has not eliminated the cost-of-capital constraint imposed by high US deficits, high debt, and high long-end yields. Ahead, the core driver of global asset pricing will increasingly concentrate on the tug-of-war between two forces: "whether inflation continues to cool" and "whether fiscal supply keeps pushing long-term rates higher." For Bitcoin and other high-volatility assets, the near-term watchpoint remains dollar liquidity and long-end Treasury yields—not just the Fed's policy rate on its own.