{"id":497016,"date":"2022-09-29T19:30:00","date_gmt":"2022-09-29T16:30:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/us-treasury-yields-are-soaring-but-what-does-it-mean-for-markets-and-crypto\/"},"modified":"2022-09-29T19:30:00","modified_gmt":"2022-09-29T16:30:00","slug":"us-treasury-yields-are-soaring-but-what-does-it-mean-for-markets-and-crypto","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/us-treasury-yields-are-soaring-but-what-does-it-mean-for-markets-and-crypto\/","title":{"rendered":"# US Treasury yields are soaring, but what does it mean for markets and crypto?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a37b91c1cf7b\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a37b91c1cf7b\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/us-treasury-yields-are-soaring-but-what-does-it-mean-for-markets-and-crypto\/#%E2%80%9D_US_Treasury_yields_are_soaring_but_what_does_it_mean_for_markets_and_crypto_%E2%80%9C\" >&#8221; US Treasury yields are soaring, but what does it mean for markets and crypto? &#8220;<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/us-treasury-yields-are-soaring-but-what-does-it-mean-for-markets-and-crypto\/#Treasury_yield_is_nominal_so_mind_the_inflation\" >Treasury yield is nominal, so mind the inflation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/us-treasury-yields-are-soaring-but-what-does-it-mean-for-markets-and-crypto\/#Regular_bonds_are_pricing_higher_inflation\" >Regular bonds are pricing higher inflation<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9D_US_Treasury_yields_are_soaring_but_what_does_it_mean_for_markets_and_crypto_%E2%80%9C\"><\/span>&#8221; US Treasury yields are soaring, but what does it mean for markets and crypto? &#8220;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<div class=\"post-content\" data-v-6ebd806f>Across all tradeable markets and currencies, U.S. Treasuries \u2014 government bonds \u2014 have significant influence. In finance, any risk measurement is relative, meaning, if one insures a house, the maximum liability is set in some form of money.\u00a0<\/p>\n<p>Similarly, if a loan is taken from a bank, the creditor has to calculate the odds of the money not being returned and the risk of the amount being devalued by inflation.<\/p>\n<p>In a worst-case scenario, let\u2019s imagine what would h<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>en to the costs associated with issuing debt if the U.S. government temporarily suspended payments to specific regions or countries. Currently, there is over $7.6 trillion worth of bonds held by foreign entities and multiple banks and governments depend on this cash flow.<\/p>\n<p>The potential cascading effect from countries and financial institutions would im<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">media<\/a>tely impact their ability to settle imports and exports, leading to further carnage in the lending markets because every participant will rush to reduce risk exposure. <\/p>\n<p>There are over $24 trillion in U.S. Treasuries held by the <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a> public, so participants generally assume that the lowest risk in existence is a government-backed debt title.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Treasury_yield_is_nominal_so_mind_the_inflation\"><\/span>Treasury yield is nominal, so mind the inflation<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The yield that is widely covered by the media is not what professional investors trade, because each bond has its own price. However, based on the contract maturity, traders can calculate the equivalent annualized yield, making it easier for the general public to understand the benefit of holding bonds. For example, buying the U.S. 10-year Treasury at 90 entices the owner with an equivalent 4% yield until the contract matures.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-09\/8119b67f-891d-41f5-83fd-07d1b2c63137.png\"><figcaption style=\"text-align: center;\"><em>U.S. Government Bonds 10-year yield. Source: TradingView<\/em><\/figcaption><\/figure>\n<p>If the investor thinks that the inflation will not be contained anytime soon, the tendency is for those participants to demand a higher yield when trading the 10-year bond. On the other hand, if other governments are running the risk of becoming insolvent or hyperinflating their currencies, odds are those investors will seek shelter in U.S. Treasuries.<\/p>\n<p>A delicate balance allows the U.S. government bonds to trade lower than competing assets and even run below the expected inflation. Although inconceivable a few years ago, negative yields became quite common after central banks slashed interest rates to zero to boost their economies in 2020 and 2021.<\/p>\n<p>Investors are paying for the privilege of having the security of government-backed bonds instead of facing the risk from bank deposits. As crazy as it might sound, over $2.5 trillion worth of negative-yield bonds still <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.bnnbloomberg.ca\/there-are-only-100-negative-yielding-bonds-left-in-the-world-1.1760840\">exist<\/a>, which does not consider the inflation impact.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Regular_bonds_are_pricing_higher_inflation\"><\/span>Regular bonds are pricing higher inflation<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>To understand how disconnected from reality the U.S. government bond has become, one needs to realize that the 3-year note&#8217;s yield stands at 4.38%. Meanwhile, consumer inflation is running at 8.3%, so either investors think the Federal Reserve will successfully ease the metric, or they are willing to lose purchasing power in exchange for the lowest risk asset in the world.<\/p>\n<p>In modern history, the U.S. has never defaulted on its debt. In simple terms, the debt ceiling is a self-imposed limit. Thus, the Congress decides how much debt the federal government can issue.<\/p>\n<p>As a comparison, an HSBC Holdings bond <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/markets.businessinsider.com\/bonds\/hsbc_holdings_plcdl-notes_201525-bond-2025-us404280au33\">maturing<\/a> in August 2025 is trading at a 5.90% yield. Essentially, one should not interpret the U.S. Treasury yields as a reliable indicator for inflation expectation. Moreover, the fact that it reached the highest level since 2008 holds less significance because data shows investors are willing to sacrifice earnings for the security of owning the lowest risk asset.<\/p>\n<p>Consequently, the U.S. Treasury yields are a great instrument to measure against other countries and corporate debt, but not in absolute terms. Those government bonds will reflect inflation expectations, but could also be severely capped if the generalized risk on other issuers increases.<\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/p>\n<p class=\"post-content__disclaimer\">The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.\n<\/p>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/us-treasury-yields-are-soaring-but-what-does-it-mean-for-markets-and-crypto\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8221; US Treasury yields are soaring, but what does it mean for markets and crypto? &#8220; Across all tradeable markets and currencies, U.S. Treasuries \u2014 government bonds \u2014 have significant influence. In finance, any risk measurement is relative, meaning, if one insures a house, the maximum liability is set in some form of money.\u00a0 Similarly,&#8230;<\/p>\n","protected":false},"author":1,"featured_media":497017,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMDkvNDcwMjZiZTctNjM5OS00NmNhLTk0NDYtOWU1M2U1ZTlhMWFlLmpwZWc=.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74862,74937,74863,74939,117358,133747,70550,71511,70551,70552,73785],"class_list":["post-497016","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-bitcoin","tag-bitcoin-price","tag-cryptocurrencies","tag-market-analysis","tag-national-debt","tag-yield-curve","tag-federal-reserve","tag-government","tag-inflation","tag-interest-rates","tag-markets"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/497016","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=497016"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/497016\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/497017"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=497016"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=497016"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=497016"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}