U.S. Treasury yields are soaring to new highs, but what does this mean for Bitcoin and Ethereum price? noshitcoins explores.
). In that sense, risk calculation in finance is relative, so every loan, mortgage and even cryptocurrency derivatives depend on the cost of capital attributed to U.S. dollars., what happens to the families, businesses and countries holding those bonds? The lack of interest debt payments would likely cause a global shortage of U.S. dollars, triggering a cascading effect.
As the general public owns over $29 trillion in the U.S. Treasury, they are deemed the lowest risk in existence. Still, the price for each of those government bonds, or the yield traded, will vary depending on the contract maturity. Assuming there’s no counterparty risk for this asset class, the single most important pricing factor is the inflation expectation.
A 4.05% yield indicates that investors are not expecting inflation to drop below the central bank's 2% target anytime soon, but it also shows confidence that the 9.1% peak CPI data from June 2022 is behind us. However, that’s not how Treasury pricing works because investors are willing to forego rewards in exchange for the security of owning the lowest-risk asset.
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