Bond Vigilantes Revolt
Benjamin Cowen examines surging Treasury yields, arguing that persistent inflation pressures from tariffs, Middle East oil shocks, and the short-term AI buildout are pushing the bond market to demand tighter monetary policy. He concludes that higher yields and tight liquidity are helping explain crypto's underperformance relative to equities, while a future growth scare could eventually bring yields down, but he remains uncertain about Bitcoin's near-term technical strength.
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Cowen says the 10-year Treasury yield is approaching 5.2%, while the 30-year yield is nearing 5.12%, signaling that the long end of the curve considers rates insufficiently high.
He argues that inflation expectations can become self-reinforcing because businesses raise prices when they expect inflation to accelerate.
Cowen presents the idea that high rates can ultimately be the solution to high rates: rising yields can trigger a growth scare, after which yields may fall.
He says rising yields pressure long-duration assets most heavily and could produce a growth scare within a few months if the current move continues.
Cowen argues that Bitcoin has broadly underperformed the S&P 500 on a relative basis during the higher-rate period, despite Bitcoin's dollar price remaining elevated.
He attributes altcoins' extended underperformance partly to tight liquidity and says many altcoins benefited from the period when borrowing costs were effectively low.
Treasury Yields Surge
Cowen explains that soaring 10-year and 30-year Treasury yields signal insufficiently tight policy and can eventually pressure earnings and risk assets.
Bitcoin Versus Rising Yields
Higher yields pressure long-duration assets, helping explain Bitcoin's weak relative performance against the S&P 500 and the prolonged underperformance of altcoins.
Tariffs, Oil, And AI Inflation
Cowen attributes renewed inflation pressure to tariffs, Middle East oil shocks, and the short-term inflationary effects of AI infrastructure investment.
The Two-Year Yield Signal
The two-year yield moved above the Fed funds rate, indicating that policy became less restrictive while markets grew more concerned about inflation than recession.
Bond Vigilantes Demand Hikes
Cowen argues that restrictive policy may require further rate hikes because a 25-basis-point increase failed to calm the long end of the yield curve.
Growth Scare Pathway
Until a growth scare emerges, Cowen expects elevated long-term yields to pressure earnings and risk assets while the Fed remains behind the inflation curve.
Liquidity Keeps Crypto Behind
Tight global liquidity, unlike monetary policy alone, explains why crypto has underperformed, while a future crisis would be needed to trigger substantial money creation.
Yield Pressure And Bitcoin Risk
Cowen concludes that bond vigilantes are demanding accountability on inflation, leaving Bitcoin's technical strength uncertain unless yields eventually reverse through a growth scare.
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