{"id":47462,"date":"2025-09-14T17:46:49","date_gmt":"2025-09-14T17:46:49","guid":{"rendered":"https:\/\/dogewisperer.com\/?p=47462"},"modified":"2025-09-14T17:46:49","modified_gmt":"2025-09-14T17:46:49","slug":"bitcoin-bulls-bet-on-fed-rate-cuts-to-drive-bond-yields-lower-but-theres-a-catch","status":"publish","type":"post","link":"https:\/\/dogewisperer.com\/?p=47462","title":{"rendered":"Bitcoin Bulls Bet on Fed Rate Cuts To Drive Bond Yields Lower, But There’s a Catch"},"content":{"rendered":"
\n

On Sept. 17, the U.S. Federal Reserve (Fed) is widely expected to cut interest rates by 25 basis points, lowering the benchmark range to 4.00%-4.25%. This move will likely be followed by more easing in the coming months, taking the rates down to around 3% within the next 12 months. The fed funds futures market is discounting a drop in the fed funds rate to less than 3% by the end of 2026.<\/p>\n

Bitcoin (BTC) bulls are optimistic that the anticipated easing will push Treasury yields sharply lower, thereby encouraging increased risk-taking<\/a> across both the economy and financial markets. However, the dynamics are more complex and could lead to outcomes that differ significantly from what is anticipated.<\/p>\n

While the expected Fed rate cuts could weigh on the two-year Treasury yield, those at the long end of the curve may remain elevated due to fiscal concerns and sticky inflation.<\/p>\n

Debt supply<\/h2>\n

The U.S. government is expected to increase the issuance of Treasury bills (short-term instruments) and eventually longer-duration Treasury notes to finance the Trump administration’s recently approved package of extended tax cuts and increased defense spending. According to the Congressional Budget Office<\/a>, these policies are likely to add over $2.4 trillion to primary deficits over ten years, while Increasing debt by nearly $3 trillion, or roughly $5 trillion if made permanent.<\/p>\n

The increased supply of debt will likely weigh on bond prices and lift yields. (bond prices and yields move in the opposite direction).<\/p>\n

“The U.S. Treasury\u2019s eventual move to issue more notes and bonds will pressure longer-term yields higher,” analysts at T. Rowe Price, a\u00a0global investment management firm, said in a recent report<\/a>.<\/p>\n

Fiscal concerns have already permeated the longer-duration Treasury notes, where investors are demanding higher yields to lend money to the government for 10 years or more, known as the term premium. <\/p>\n

The ongoing steepening of the yield curve \u2013 which is reflected in the widening spread between 10- and 2-year yields, as well as 30- and 5-year yields and driven primarily by the relative resilience of long-term rates \u2013 also signals increasing concerns about fiscal policy.<\/p>\n

Kathy Jones, managing director and chief income strategist at the Schwab Center for Financial Research, voiced a similar opinion this month, noting<\/a> that “investors are demanding a higher yield for long-term Treasuries to compensate for the risk of inflation and\/or depreciation of the dollar as a consequence of high debt levels.”<\/p>\n

These concerns could keep long-term bond yields from falling much, Jones added.<\/p>\n

Stubborn inflation<\/h2>\n

Since the Fed began cutting rates last September, the U.S. labor market has shown signs of significant weakening, bolstering expectations for a quicker pace of Fed rate cuts and a decline in Treasury yields. However, inflation has recently edged higher, complicating that outlook.<\/p>\n

When the Fed cut rates in September last year, the year-on-year inflation rate was<\/a> 2.4%. Last month, it stood at 2.9%, the highest since January’s 3% reading. In other words, inflation has regained momentum, weakening the case for faster Fed rate cuts and a drop in Treasury yields.<\/p>\n

Easing priced in?<\/h2>\n

Yields have already come under pressure, likely reflecting the market\u2019s anticipation of Federal Reserve rate cuts.<\/p>\n

The 10-year yield slipped to 4% last week, hitting the lowest since April 8, according to data source TradingView. The benchmark yield has dropped over 60 basis points from its May high of 4.62%.<\/p>\n

According to Padhraic Garvey, CFA, <\/strong>regional head of research, Americas at ING, the drop to 4% is likely an overshoot to the downside.<\/p>\n

“We can see the 10yr Treasury yield targeting still lower as an attack on 4% is successful. But that’s likely an overshoot to the downside. Higher inflation prints in the coming months will likely cause long-end yields some issues, requiring a significant adjustment,” Garvey said in a note to clients last week.<\/p>\n

Perhaps rate cuts have been priced in, and yields could bounce back hard following the Sept. 17 move, in a repeat of the 2024 pattern. The dollar index suggests the same, as noted early this week<\/a>.<\/p>\n

Lesson from 2024<\/h2>\n

The 10-year yield fell by over 100 basis points to 3.60% in roughly five months leading up to the September 2024 rate cut.<\/p>\n

The central bank delivered additional rate cuts in November and December. Yet, the 10-year yield bottomed out with the September move and rose to 4.57% by year-end, eventually reaching a high of 4.80% in January of this year.<\/p>\n

According to ING, the upswing in yields following the easing was driven by economic resilience, sticky inflation, and fiscal concerns.<\/p>\n

As of today, while the economy has weakened, inflation and fiscal concerns have worsened as discussed earlier, which means the 2024 pattern could repeat itself.<\/p>\n

What it means for BTC?<\/h2>\n

While BTC rallied from $70,000 to over $100,000 between October and December 2024 despite rising long-term yields, this surge was primarily fueled by optimism around pro-crypto regulatory policies under President Trump and growing corporate adoption of BTC and other tokens.<\/p>\n

However, these supporting narratives have significantly weakened looking back a year later. Consequently, the possibility of a potential hardening of yields in the coming months weighing over bitcoin cannot be dismissed.<\/p>\n

Read: Here Are the 3 Things That Could Spoil Bitcoin’s Rally Towards $120K<\/a><\/em><\/strong><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

On Sept. 17, the U.S. Federal Reserve (Fed) is widely expected to cut interest rates by 25 basis points, lowering the benchmark range to 4.00%-4.25%. This move will likely be followed by more easing in the coming months, taking the rates down to around 3% within the next 12 months. The fed funds futures market […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"iawp_total_views":0,"footnotes":""},"categories":[2],"tags":[3,4,5],"class_list":["post-47462","post","type-post","status-publish","format-standard","hentry","category-news","tag-crypto","tag-doge","tag-news"],"_links":{"self":[{"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/posts\/47462","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=47462"}],"version-history":[{"count":0,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/posts\/47462\/revisions"}],"wp:attachment":[{"href":"https:\/\/dogewisperer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=47462"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=47462"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=47462"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}