Japanese bonds challenge bitcoin momentum has received from changing interest rate expectations that raised the price of the largest cryptocurrency by 8% in less than seven days.
The 10-year Japanese government bond (JGB) yield has risen to a 30-year high of 2.85%, adding 18 basis points since the beginning of the month and raising borrowing costs in other major developed markets.
The 10-year US Treasury yield has gained almost three basis points and is testing 4.5% for the first time in almost a month. The German 10-year bond is close to 3% and the British 10-year bond is yielding around 4.8%. Real yields, which adjust for inflation, are also rising.
For years, Japan kept global yields low through near-zero interest rates and aggressive quantitative easing. That policy fueled carry trades that involved borrowing yen at a low rate and investing in high-yield bonds elsewhere. Therefore, Japan indirectly limited borrowing costs in advanced nations.
This is important for bitcoin because higher government bond yields increase the opportunity cost of holding a non-cash asset. Capital parked in BTC is capital that is not earning the strongest, most reliable returns available in fixed income.
