Japanese Bonds Challenge Bitcoin Boost benefited from changing interest rate expectations that sent the price of the largest cryptocurrency up 8% in less than seven days.
The yield on 10-year Japanese government bonds (JGBs) jumped to a 30-year high of 2.85%, adding 18 basis points since the start of the month and raising borrowing costs in other major developed markets.
The 10-year U.S. Treasury yield gained nearly three basis points and tested 4.5% for the first time in nearly a month. The German 10-year Bund is approaching 3% and the UK 10-year Gilt yields around 4.8%. Real yields, adjusted for inflation, are also increasing.
For years, Japan kept global yields under wraps through near-zero interest rates and aggressive quantitative easing. This policy fueled carry trades that involved borrowing yen at a low rate and investing elsewhere in high-yielding bonds. Thus, Japan indirectly capped borrowing costs in advanced countries.
This is important for Bitcoin because higher government bond yields increase the opportunity cost of holding an asset that generates no cash flow. Capital parked in BTC is capital that does not generate the strongest and most reliable returns available in fixed income.
