Rising Treasury Yields Could Be a Bullish Signal for Bitcoin
For years, rising U.S. Treasury yields have typically been seen as a negative for bitcoin (BTC) and other risk assets. But a closer look at what’s driving the current yield surge suggests a more nuanced picture—one that could actually favor bitcoin.
Inflation Cools, Yields Rise
On Tuesday, fresh U.S. inflation data surprised to the downside. The Consumer Price Index (CPI) rose just 0.2% month-over-month in April for both headline and core measures, undershooting expectations of a 0.3% increase. Year-over-year, inflation came in at 2.3%—the lowest level since February 2021.
Despite this softer inflation reading, bond markets moved in the opposite direction. Prices for 10-year Treasuries fell, pushing yields up to 4.5%, their highest level since April 11, per TradingView. The 30-year yield rose to 4.94%, near an 18-year high.
In May alone, the benchmark 10-year yield has jumped 30 basis points. This resilience in yields—despite lower inflation, tariff pauses, and progress on the U.S.-China trade front—marks a departure from the traditional risk-off narrative.
Why Yields Are Rising Anyway
Typically, higher yields trigger a flight from equities and crypto into the perceived safety of bonds. But this time, analysts say fiscal expectations are driving the market.
According to Spencer Hakimian, founder of Tolou Capital Management, the latest bond selloff reflects investor expectations for aggressive fiscal expansion under a second Trump administration.
“Seeing bonds fall on a soft CPI print screams fiscal expansion,” Hakimian wrote on X. “Everyone’s playing to win the midterms—debt and deficits be damned. That’s great for Bitcoin, gold, and stocks. It’s terrible for bonds.”
Hakimian highlighted that Trump’s proposed tax plan could add another $2.5 trillion to the U.S. deficit. That plan, reported by Bloomberg earlier this week, includes $4 trillion in tax cuts offset by just $1.5 trillion in spending reductions—effectively a net fiscal boost of $2.5 trillion.
Markets Shift Focus to Fiscal Policy
Arif Husain, head of global fixed income and CIO at T. Rowe Price, echoed the growing consensus that fiscal dynamics will soon overshadow inflation as the key driver of markets.
“Fiscal expansion might support growth, but more importantly, it’s likely to heap more pressure on the Treasury market,” Husain said in a blog post. “I’m now even more convinced the 10-year yield could hit 6% within the next 12–18 months.”
Repricing Sovereign Risk
Pseudonymous macro analyst EndGame Macro pointed to a deeper issue: the rising yields may be signaling not inflation fears, but concern over U.S. sovereign risk and long-term debt sustainability.
“When bond yields keep climbing even as inflation falls, it’s not about the inflation cycle—it’s about the U.S.’s ability to fund its growing debt,” they said on X.
That view aligns with the concept of “fiscal dominance,” a framework where monetary policy takes a back seat to the needs of government financing. Higher yields raise debt servicing costs, which in turn lead to more borrowing and an even larger supply of bonds—setting off a potential vicious cycle.
In this scenario, assets like bitcoin, often seen as an anti-establishment hedge, could benefit.
Could the Fed Step In?
If yields rise too far, the Federal Reserve and U.S. Treasury may resort to yield curve control—actively buying bonds to cap yields, say, at 5%. Such interventions would inject liquidity into the system, potentially fueling demand for risk assets like bitcoin, gold, and equities.
In short, while rising yields have long been seen as a threat to BTC, the underlying causes of today’s bond market dynamics may flip that narrative on its head. Bitcoin could be one of the surprise beneficiaries of America’s fiscal reckoning.
