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The bond market, often regarded as the bedrock of global financial stability, is showing signs of severe strain, with market participants on X sounding the alarm over what many are calling a “broken” system. Jim Bianco of Bianco Research, a prominent voice in financial analysis, published a stark warning on X: “Something has broken tonight in the bond market. We are seeing a disorderly liquidation. If I had to GUESS, the basis trade is in full unwind.”
Bianco highlighted the severity of the situation, noting that the 30-year US Treasury yield spiked 56 basis points in just three trading days since Friday, a move he described as historic: “Something has broken tonight in the bond market. We are seeing a disorderly liquidation. If I had to GUESS, the basis trade is in full unwind. […] The last time this yield rose this much in 3 days (close to close) was January 7, 1982, when the yield was 14%. This kind of historic move is caused by a forced liquidation, not human managers make decisions about the outlook for rates at midnight ET.
This sentiment was echoed across the platform, with Cathie Wood of ARK Invest stating, “this swap spread is suggesting serious liquidity issues in the US banking system. This crisis is calling out for some kind of Mar-a-Lago Accord on free trade, in tandem with serious support from the Fed? No more time to waste.”
Similarly, Daniel Yan, the founder and CIO of Kryptanium Capital, a managing partner at Matrixport Ventures warned, “First, we have a tariff driven equity meltdown. Then the bond basis started to unwind and looks ugly now. The last straw is the credit market – if we starts to see the HY index above 6%, then probably an emergency Fed intervention is at the corner, or, a real crisis.”
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Financial journalist Charlie Gasparino added to the chorus, noting, “Now stuff is getting interesting and scarily so; wicked spike in long dated bond yields portends an unwind of a massive trade, possibly a hedge fund losing money and imploding or a major foreigner creditor dumping treasuries in retaliation to Trumps trade war, none of which are good. I’m sure Scott Bessent’s phone is ringing off the hook right about now. Buckle up for the open”
Financial commentator Peter Schiff added, “As I warned earlier, the Treasury market is crashing. The yield on the 10-year just hit 4.5%, and the yield on the 30-year just hit 5%. Without an emergency rate cut tomorrow morning and the announcement of a massive QE program, tomorrow could be a 1987-style stock market crash.”
Macro analyst Alex Krueger agrees: “The long bond is crashing. US long interest rates are now considerably above Trump’s inauguration day. That’s how Trump & Bessent shooting themselves in the foot looks like. With a shotgun.”
What’s Happening?
At the heart of this turmoil supposedly lies the basis trade, a leveraged strategy employed by hedge funds to exploit price discrepancies between Treasury futures and the underlying bonds. Bianco posits that this trade, which ballooned in popularity during years of ultra-low interest rates and quantitative easing, may now be in a full unwind.
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The rapid deleveraging has caused bond prices to plummet as yields spike, eroding the safe-haven status of US Treasuries. As yields soar to 5.00% the implications for the broader financial ecosystem, including the Bitcoin and crypto markets, are profound.
This development is particularly alarming at a time when financial markets are already reeling from President Donald Trump’s newly announced global tariff regime. Trump’s tariffs have exacerbated fears of inflation and a recession.
Notably, the bond market’s dysfunction is not occurring in isolation. Crude oil prices have collapsed by 21% since what Bianco refers to as “Liberation Day,” falling to $57 per barrel, the lowest level since April 2021. This simultaneous crash in bond prices and crude oil is unprecedented, signaling broader systemic stress.
Implications For Bitcoin And Crypto
For the Bitcoin and crypto markets, this upheaval presents both risks and opportunities. Bitcoin and other digital assets have often been touted as hedges against traditional financial instability, yet their performance in recent months has shown a growing correlation with risk assets like equities.
As S&P futures tumbled by -12% over the past 4 trading sessions amid the bond market rout, BTC is down -8% as it faces a spillover effect. The US Dollar Index (DXY), which has risen since Thursday’s low, indicates net foreign buying into US markets, countering speculation that China is offloading Treasuries to “punish” the US over tariffs.
Bianco argues that if China were indeed selling Treasuries en masse, the dollar would likely be declining, not appreciating. This suggests that the primary driver of the bond market sell-off is domestic, likely tied to the forced liquidation of leveraged positions rather than foreign intervention.
Amid this turmoil, calls for Federal Reserve intervention have grown louder. Some market participants on X have speculated about the possibility of an emergency rate cut to stem the bleeding, something which could be extremely bullish for Bitcoin.
“Is it foreigners dumping? The basis trade blowing up? Inflation fears? No one knows for sure.
But look past the “why,” and it all leads to the same fork in the road: Fed intervention—or net interest expense blasts through $1 trillion,” Bitcoin expert Sam Callahan writes via X.
As reported earlier today by Bitcoinist, Bitwise Chief Investment Officer (CIO) Matt Hougan argues that Bitcoin could benefit significantly from the Trump administration’s push toward a weaker dollar.
Bitcoin commentator Stack Hodler added via X: “This isn’t 2008. It’s worse. The Global Sovereign Debt bubble is bursting right in front of us. Two options: Total collapse… OR the Fed buys everything, institutional credibility hits new lows, neutral reserve assets gold & Bitcoin take the treasury safe haven bid and full send.”
At press time, Bitcoin traded at $76,952.
Featured image created with DALL.E, chart from TradingView.com
