Key facts
- Japanese 10-year government bond yields have surged to a 30-year high of 2.85%.
- This rise in yields increases borrowing costs across major developed markets.
- Higher bond yields raise the opportunity cost of holding assets like Bitcoin.
- Bitcoin's price has risen 8% to $64,000 this month.
- Softer U.S. inflation risks and weaker job growth had previously supported Bitcoin's rally.
Yields on 10-year Japanese government bonds have surged to a 30-year high of 2.85%, adding 18 basis points since the start of July. This increase is raising borrowing costs across major developed markets and poses a challenge to Bitcoin's recent rally. The U.S. 10-year Treasury yield has gained nearly three basis points, testing 4.5% for the first time in nearly a month, while the German 10-year bund approaches 3% and the U.K. 10-year gilt yields around 4.8%. Real yields are also climbing.
Historically, Japan's near-zero interest rates and quantitative easing policies helped suppress global yields, fueling carry trades where investors borrowed yen at low rates to invest elsewhere. This indirectly capped borrowing costs in advanced economies. Higher government bond yields increase the opportunity cost of holding assets like Bitcoin, which generate no income, potentially offsetting the positive impact of recent developments.
Bitcoin's price had climbed 8% to $64,000 this month, largely driven by shifting Federal Reserve interest-rate expectations. This sentiment was boosted by Fed Chair Kevin Warsh's July 1 comments suggesting inflation risks have lessened, and by Thursday's June nonfarm payrolls report, which showed job growth at about half the forecast and a drop in labor force participation to a five-year low of 61.5%. Bitcoin found strong support near $58,000 on July 1. However, the hardening of global yields, led by Japan, could temper this bounce. Despite the rise in Japanese yields, Goldman Sachs expects the yen to continue weakening and maintains a preference for yen-funded carry trades.