In the past, whether during the 2008 financial crisis, the 2020 pandemic, or the early days of the Russia-Ukraine conflict, global capital would flood into U.S. Treasury bonds. The reason is simple:
U.S. Treasury bonds have always been regarded as one of the safest assets in the world. When the market is in panic, investors typically choose to "preserve their principal," thus buying a large amount of U.S. debt. As bond prices rise, yields fall, so historically we often see:
War breaks out → Buy U.S. Treasury bonds → Yields fall
But this time, as tensions escalate in the Middle East, U.S. Treasury yields are rising instead.
Why is this happening? How will this affect risk assets like Bitcoin?
(U.S. 10-year Treasury yield candlestick chart - AiCoin screenshot)
Fundamentals of U.S. Treasury Bonds: Understand the "Anchor of Assets" in Three Minutes
- What are U.S. Treasury Bonds?
U.S. Treasury bonds are national credit bonds issued by the U.S. Department of the Treasury on behalf of the federal government. Investors lend money to the U.S. government, which pays interest periodically and repays the principal at maturity.
- The "Seesaw" of Price and Yield:
When bond prices rise, yields fall; when bond prices fall, yields rise.
For example: Assume a bond with a face value of $100, paying a fixed interest of $4 per year:
➔ If the market rushes to buy, and the price rises to $105, the actual yield falls to about 3.8%;
➔ If no one is willing to buy, and the price falls to $95, then the yield rises to about 4.2%.
- Why is the 10-year Treasury bond so critical?
The yield of the 10-year Treasury bond is regarded as the benchmark for the global risk-free rate. Whether it is global mortgage rates, corporate bond issuance costs, or the valuation models of risk assets such as stocks and cryptocurrencies, they all use it as an anchor point.
Why is it that during this war, U.S. Treasury yields have actually risen?
The market is now concerned not only about the war but also about the ripple effects of the war.
① Market worries about a resurgence of inflation
The Middle East is a crucial energy supply region globally. After the war escalated, the market's first thoughts were:
- Rising oil prices
- Rising natural gas prices
- Increased global transportation costs
- Potential resurgence of inflation in the U.S.
If inflation rises again in the future, investors naturally demand higher yields to offset the impact of declining purchasing power.
Thus, we see: War → Rising inflation expectations → U.S. Treasury yields rise
② U.S. fiscal pressure may further expand
War means increased fiscal spending, which includes:
- Increased military spending
- Assistance to allies
- Expansion of the defense budget
And the U.S. is already in a historically high debt and deficit state. The market is beginning to worry:
The U.S. will need to issue more Treasury bonds for financing in the future.
Increased bond supply with insufficient demand will naturally lead to falling prices and rising yields.
③ The Fed's interest rate cuts may continue to be delayed
War leads to rising oil prices, while rising oil prices can push up the CPI.
If inflation rebounds, the Fed may continue to maintain high rates.
Long-term rates will then be repriced, causing U.S. Treasury yields to rise simultaneously.
④ Where did the safe-haven funds go?
There is still safe-haven investment. It’s just that funds have not all flowed into long-term U.S. Treasury bonds.
Some funds have flowed into:
- Gold
- U.S. dollar cash
- Short-term Treasury bonds
- Defensive sectors
(The focus of market trading has shifted from "safe haven" to "inflation + fiscal risk")
Which assets will be affected by rising U.S. Treasury yields?
U.S. Treasury yields are called the "anchor" for global asset pricing. As yields continue to rise, various assets will be affected.
📈 For BTC: Short-term pressure, long-term still depends on liquidity
In recent years, Bitcoin has increasingly been influenced by ETF and institutional fund allocations. For institutions, they compare every day:
Buy U.S. Treasury bonds with a 5% yield? Or allocate more volatile BTC?
Thus: When yields rise rapidly, risk assets often face a return of funds to the bond market, which may put short-term pressure on BTC.
However, if the Fed subsequently enters a rate-cutting cycle again and global liquidity improves, Bitcoin is still expected to regain investor favor. The core that determines Bitcoin's long-term trend remains liquidity, not just the yields of U.S. Treasuries themselves.
(Chip distribution data shows that BTC is touching resistance levels)
🟡 For Gold: Opportunity costs increase
Gold itself does not generate interest. When Treasury yields increase, the opportunity cost of holding gold also rises, leading to short-term suppression of gold prices.
However, if the yield increase is due to market concerns about U.S. fiscal risks, dollar credit, and other factors, gold may also see support due to safe-haven demand. Therefore, the gold trend needs to be evaluated in conjunction with the U.S. dollar and market sentiment.
📉 For U.S. Stocks: High-valued assets face the most pressure
The higher the Treasury yields, the more it means investors can receive higher returns without taking on too much risk.
For example: Previously, the annualized yield for Treasury bonds was only 3%, and many funds were willing to invest in growth stocks.
Now that Treasury yields are around 5%, many institutions will reconsider: "Since I can get decent returns from U.S. Treasury bonds, why should I take on greater volatility in the stock market?"
Therefore, high-valued tech stocks and growth stocks are usually more susceptible to impact.
(SanDisk/Micron and other tech stocks have fallen over 30% from their peaks)
What should investors pay special attention to?
Macro events change daily, but what truly impacts the market is often data.
In the coming period, it is recommended to closely monitor:
- Trends in U.S. 10-year and 30-year Treasury yields;
- Whether oil prices continue to rise;
- U.S. CPI, PCE, and other inflation data;
- Whether Fed rate cut expectations are readjusted again;
- The movement of the U.S. dollar index (DXY)
(Comparison of 10-year yield, dollar index, and BTC trends - AiCoin multi-window feature)
For users needing quantitative research or strategy development, AiCoin OpenAPI has also supported macro data interfaces for U.S. Treasuries, which can be directly integrated into strategies or risk control systems to help continuously track market changes.
https://www.aicoin.com/zh-Hans/opendata
This time, the rise in U.S. Treasury yields does not signify a failure of safe-haven logic; rather, the market perceives that the inflation, fiscal deficit, and high-interest rate risks brought on by the war have surpassed short-term safe-haven demands. For the crypto market, U.S. Treasury yields remain one of the key indicators of global liquidity. When yields continue to rise, risk assets like Bitcoin may face short-term pressure; however, once liquidity loosens again, the crypto market may also usher in new opportunities.
Risk warning: The views mentioned in this article are for technical analysis learning and reference only and do not constitute any investment advice. Cryptocurrencies are highly risky, and trading based on this is done at your own risk.
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