Bond Curve Goes Full Flat: Bitcoin's Yield-Free Reign Is Being Audited 📉

The gap between U.S. 10-year and two-year Treasury yields has narrowed to 28 basis points, the tightest spread since April 2025, according to TradingView data, signaling a hawkish shift in Federal Reserve expectations that is complicating the case for a near-term bitcoin rally. Bitcoin was last trading around $64,010.98, with analysts pointing to the curve as a leading indicator of tighter policy ahead.

The flattening extends beyond the front end of the curve: the spread between 30-year and five-year yields has also narrowed to its lowest level since April 2025, marking a reversal from the steepening seen earlier this year when markets were pricing in rate cuts that had been cited as a tailwind for risk assets including cryptocurrencies. Skanda Amarnath, executive director of EmployAmerica, said the move is "the clearest market signal that the Fed is getting more hawkish," a stance that typically lifts fixed-income yields and reduces the relative appeal of non-yielding assets such as bitcoin.

The Fed's latest projections show policy rates remaining higher through 2028, reinforcing expectations that borrowing costs will stay elevated for an extended period. The two-year yield tracks near-term Fed policy expectations while the 10-year yield reflects longer-term growth and inflation views, making the spread between them a closely watched gauge of where the central bank is headed.

As the curve flattens, fixed-income instruments offer rising competition for capital that might otherwise flow into crypto markets, a dynamic that has historically weighed on risk-asset valuations. The current 28 basis point spread now sits well below levels seen at the start of the year, when a steeper curve had been interpreted by some investors as a green light for risk-on positioning across digital assets.