Bonds Throw a 2008 Reunion, Invite Crypto 😬📉

Average yields on the Bloomberg Global Treasury Index climbed to 3.68%, the highest level since the 2008 global financial crisis, leaving the benchmark on track for its biggest monthly drop since March. The selloff comes days before rate decisions from the Federal Reserve, Bank of Japan, and Bank of England, with US 30-year Treasury yields trading just below their highest level since 2007 and UK gilts logging their longest streak of daily closes above 5% in almost two decades. Germany's 10-year yield reached its highest point since 2011, while Japan's 40-year yield moved above 4% and its five-year yield hit a record since the maturity launched in 2000, leaving Australia with the highest benchmark yields in the developed world.

The rout has spread quickly into funds that own long-dated debt. BlackRock's iShares 20+ Year Treasury Bond ETF fell almost 5% in one month, has lost more than half its value since 2020, and sits alongside a global benchmark roughly 20% below its early-2021 peak. Market volatility has climbed in parallel, with the ICE BofA MOVE Index hitting a two-month high on Thursday after Fed Chairman Kevin Warsh cut back on forward guidance. Bank of America noted that less guidance lets markets price the action they believe the Fed should take, and Barclays warned that a hike, or a poorly explained hold, could push parts of the curve higher.

Rate expectations have shifted as stronger US employment and growth data pulled traders from pricing cuts to weighing hikes. Markets now assign roughly a one-in-three probability to a hike at the July 28-29 meeting, with 104 economists split on the path ahead. Energy added an extra wrinkle earlier in the week: Brent crude broke above $100 on Thursday before falling 7% on Sunday after Iran signaled a pause, while gold climbed above $4,100.

For crypto, the macro backdrop cuts in two directions. Higher government yields raise the risk-free rate every asset must beat, pressuring equity valuations, corporate borrowing costs, and heavily indebted governments, yet Moody's has said markets may have entered a period of structurally higher inflation, higher rates, and wider fiscal deficits, conditions that historically support hard assets. Bitcoin ($BTC) traded near $65,157, up 1.3% over the past day, holding firm even as global bonds sold off. The Federal Reserve's decision on Wednesday will show whether bond markets have priced policy correctly or whether yields have further to climb.