Bitcoin Steady While Bond Yields Cross Highest Since 2007

Debt in the United States has become most expensive, with US bond yields rising above 4.16% for ten year Treasuries.

That’s the highest level since 2007, when the American economy was booming, while in this 2022 there has been a slowdown for the second quarter, and some even expect a recession.

Bond yields on the other hand have only known up, nearly doubling since August, that’s just two months ago.

Nor is any slowdown expected, as the Federal Reserve Banks will further hike by 0.75% in two weeks according to market estimates, making it the fastest interest rate raises in living memory.

All this feeds into mortgages because the government is the most credit worthy borrower. Anyone less credit worthy has to pay a higher rate of interest than 4.2% as otherwise banks just lend it to the government instead.

Mortgage interest rates therefore are and will be rising by at least 4%, doubling and even trippling monthly payments for millions of Americans.

That should feed into housing as current prices become far less affordable, and that in turn may feed into consumer spending as Americans feel less rich.

Not least because borrowing costs in USA are now higher than in UK despite weeks of market turbulences in Britain.

The British government has been spooked however into both tax rises and spending cuts, satisfying the bankers whom now seemingly set policy, and are rewarding in lowering bond yields.

While in United States there has been no fiscal response to these hikes and hikes in interest rates, save for a 5% new tax on income above $10 million, which includes capital gains.

That led to the richest billionaires in America selling $70 billion in shares in 2021, contributing to the stock market crash.

Interestingly however bitcoin has held steady despite these recent bond rises, potentially making the crypto more appealing.

“Cryptos remain grounded as a major move in yields is powering the strong dollar trade. Bitcoin continues to hold the $19,000 level despite a solid move higher with yields,” said Edward Moya, an analyst at broker Oanda. “Bitcoin resilience has been impressive, but will likely get tested over these next few weeks.”

Bitcoin has slightly risen today, as have stocks, while natural gas continues its crash to $5.50, down from a peak of $10 in August.

There’s reports Europe is flooded with liquid gas, while Germany says they are no longer dependent on Russian gas.

This should ease pressure on inflation, and thus on interest rate hikes, and thus on stocks as well as potentially on bitcoin which has been following its own course recently.

But for bonds and the more and more expensive government debt, it remains to be seen if and when there might be some respite.