The 10-year U.S. Treasury yield surged to 4.979% on Friday—just a breath away from 5%. The 30-year yield is even more ruthless: 5.37%, the highest since 2007.
Think about it: earning 5% while doing nothing risk-free. What does that mean? It means the opportunity cost of buying Bitcoin is 5%. The opportunity cost of buying Nvidia is also 5%. For any risky asset, the opportunity cost is 5%.
Institutions aren’t gambling with their own money. Their money has costs, performance evaluations, and benchmarks. When the risk-free rate reaches 5%, the threshold for allocating to risky assets gets higher. If you’re not rising fast enough, they won’t come. If your volatility is too high, they also won’t come—because for them, they can just earn 5% lying there. Why would they play whack-a-mole with you?
This isn’t just a crypto-market issue—it’s about all risky assets. But crypto reacts the most violently because it’s at the far end of the risk spectrum and the most sensitive asset, with no cash-flow support. When interest rates move, it hurts first.
So why are yields skyrocketing?
Three things are piling on top of each other.
First, oil prices. Brent crude broke through $107, jumping 6.3% in a single day. When energy prices rise, inflation expectations can’t hold down. If inflation can’t be kept down, forget about rate cuts.
Second, PPI. In August, the year-over-year producer price index rose 5.4%, above expectations. Wholesale-side inflation is still climbing; it will take time to transmit to the consumer side.
Third, and most subtly: Trump promised that if Republicans win the midterm election, they’ll send $5,000 checks to all adult Americans. Do the math—roughly $1.2 trillion to $1.3 trillion. Where does the money come from? From borrowing. Borrow more, issue more Treasuries. The market can’t absorb it, so yields keep rising.
What’s most ironic? Treasury Secretary Besen?t (Bessent) hasn’t made no effort. He expanded the size of Treasury buyback operations, trying to push down long-end yields. On Thursday, the operational cap was set at $6 billion—three times the usual routine. But in the end, only $5.19 billion was actually repurchased, not even hitting the cap. For 10- to 20-year Treasuries, buybacks didn’t fully reach the cap—something that’s never happened in history.
Even when the government itself stepped in to buy its own bonds, it still couldn’t push prices up. The market is voting with its feet. This isn’t a problem of insufficient buying demand—it’s a problem of the price being wrong. Unless yields rise to some level, nobody is willing to take the trade.
Just wait. Wait for the September 16 settlement. Wait for the smoke to clear.
— 清流渠 #美国10年期国债收益率逼近5%
Think about it: earning 5% while doing nothing risk-free. What does that mean? It means the opportunity cost of buying Bitcoin is 5%. The opportunity cost of buying Nvidia is also 5%. For any risky asset, the opportunity cost is 5%.
Institutions aren’t gambling with their own money. Their money has costs, performance evaluations, and benchmarks. When the risk-free rate reaches 5%, the threshold for allocating to risky assets gets higher. If you’re not rising fast enough, they won’t come. If your volatility is too high, they also won’t come—because for them, they can just earn 5% lying there. Why would they play whack-a-mole with you?
This isn’t just a crypto-market issue—it’s about all risky assets. But crypto reacts the most violently because it’s at the far end of the risk spectrum and the most sensitive asset, with no cash-flow support. When interest rates move, it hurts first.
So why are yields skyrocketing?
Three things are piling on top of each other.
First, oil prices. Brent crude broke through $107, jumping 6.3% in a single day. When energy prices rise, inflation expectations can’t hold down. If inflation can’t be kept down, forget about rate cuts.
Second, PPI. In August, the year-over-year producer price index rose 5.4%, above expectations. Wholesale-side inflation is still climbing; it will take time to transmit to the consumer side.
Third, and most subtly: Trump promised that if Republicans win the midterm election, they’ll send $5,000 checks to all adult Americans. Do the math—roughly $1.2 trillion to $1.3 trillion. Where does the money come from? From borrowing. Borrow more, issue more Treasuries. The market can’t absorb it, so yields keep rising.
What’s most ironic? Treasury Secretary Besen?t (Bessent) hasn’t made no effort. He expanded the size of Treasury buyback operations, trying to push down long-end yields. On Thursday, the operational cap was set at $6 billion—three times the usual routine. But in the end, only $5.19 billion was actually repurchased, not even hitting the cap. For 10- to 20-year Treasuries, buybacks didn’t fully reach the cap—something that’s never happened in history.
Even when the government itself stepped in to buy its own bonds, it still couldn’t push prices up. The market is voting with its feet. This isn’t a problem of insufficient buying demand—it’s a problem of the price being wrong. Unless yields rise to some level, nobody is willing to take the trade.
Just wait. Wait for the September 16 settlement. Wait for the smoke to clear.
— 清流渠 #美国10年期国债收益率逼近5%