Japanese bonds challenge boosted bitcoin has received from changing interest rate expectations that lifted the price of the largest cryptocurrency by 8% in less than seven days.
The 10-year Japanese government bond (JGB) yield rose to a 30-year high of 2.85%, adding 18 basis points since the start of the month and raising borrowing costs across other major developed markets.
The US 10-year Treasury yield is up nearly three basis points, testing 4.5% for the first time in nearly a month. The German 10-year bottom is approaching 3% and the UK 10-year gilt is yielding around 4.8%. Real interest rates, adjusted for inflation, are also rising.
For years, Japan kept global interest rates depressed through near-zero interest rates and aggressive quantitative easing. This policy fueled carry trades that involved borrowing the yen at a low interest rate and investing in high-yield bonds elsewhere. Thus, Japan indirectly limited borrowing costs in advanced countries.
This matters for bitcoin because higher government bond yields increase the opportunity cost of holding an asset that does not generate cash. Capital parked in BTC is capital not earning the stronger, more reliable returns available in fixed income.
