- Global bond yields are surging again, keeping pressure on Bitcoin and other risk assets.
- High oil prices are fueling inflation fears and raising expectations for further Fed rate hikes.
- Bitcoin remains resilient as ETF inflows and strong demand around $84,000 support the market.
The recent drop in global bond yields suggested the bond selloff was slowing down. That has changed. Yields have climbed back near multi-year highs, oil prices remain high, and markets are again pricing in further Fed rate hikes.
The bond selloff remains a major risk for Bitcoin, even though BTC has held up relatively well so far.
Global Bond Yields Rise Again After Brief Dip
Global bond yields fell briefly earlier this week, giving markets some relief. On September 21, the U.S. 10-year Treasury yield dropped to 4.962% from 5.041% the week before. Yields in Germany, France and the UK also fell.
Lower oil prices and easing concerns about energy supplies through the Strait of Hormuz reduced inflation worries.
But the drop in yields did not last.
By September 24, the U.S. 10-year yield had risen to 5.1497% and is trading at 5.18% at press time, its highest level since 2007. The 30-year Treasury yield also reached its highest level in more than 20 years, at 5.47%. The rise was due to inflation concerns and expectations that central banks will continue raising rates.
The latest moves show that the earlier drop in bond yields was a temporary pause, not the end of the bond selloff.
Why Oil Matters
Oil has become a major factor for the bond market. Oil prices have risen because of concerns about supply disruptions linked to the conflict between the U.S. and Iran and wider tensions in the Middle East. On Thursday, oil prices jumped after an attack on Saudi Arabia raised fresh concerns about supply.
Brent oil later fell on Friday as markets assessed the possibility of a U.S.-Iran truce. Brent was around $105.85 per barrel, while WTI was around $93.80. Even after Friday’s drop, Brent was still up 2.2% for the week.
High oil prices keep inflation elevated. That makes central banks less willing to cut interest rates. Investors also demand higher bond yields when they expect inflation to remain high.
This puts additional pressure on long-term government bonds.
The Fed is Adding More Pressure
The Federal Reserve raised interest rates by 0.25 percentage points on September 16, its first rate hike in three years. Since then, higher oil prices and inflation concerns have increased expectations for another Fed rate hike.
Markets are pricing in about a 71% chance of another Fed rate hike in October. This matters for Bitcoin because higher interest rates make non-interest-bearing assets such as Bitcoin less attractive compared with interest-bearing assets. Higher rates also reduce the amount of capital available for riskier investments.
However, the relationship is not always direct. Bitcoin can rise even when bond yields are high. But prolonged high borrowing costs put pressure on speculative assets like Bitcoin.
Bitcoin is Holding Up
Bitcoin’s recent price action shows both strength and weakness. BTC rose above $87,000 earlier in the week but later fell toward $84,000 as Treasury yields jumped.
Notably, Bitcoin has remained relatively resilient despite worsening bond market conditions. U.S. spot Bitcoin ETFs also continued to attract capital. Around $190.7 million flowed into the ETFs on September 24, marking six straight days of positive inflows.
Bitcoin holding around $84,000 while the 10-year Treasury yield sits near 5.2% shows that buyers are still supporting the market.
What Bitcoin Traders Should Watch
Bitcoin traders are watching several key macro and market signals:
- Oil prices: A continuous decline in oil prices would reduce inflation pressure and weaken expectations for additional Fed rate hikes.
- Treasury yields: A decline in the 10-year Treasury yield from around 5% would ease pressure on risky assets such as Bitcoin. A further rise in yields would tighten financial conditions even more.
- Bitcoin’s price: If BTC remains around $84,000 amid high yields and oil prices, it shows that strong demand is supporting the market.
In sum, the global bond selloff is not over. Yields briefly fell earlier in the week but then climbed back to multi-year highs. High oil prices and expectations of further Fed rate hikes are also adding pressure. Bitcoin is showing resilience amid strong ETF inflows.
Related: US Treasury Buys Back $6B of Debt as Japan’s Bond Yields Surge: What It Means for Bitcoin and Crypto
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