According to Woofun AI, the bond market is undergoing a fierce sell-off, with the 10-year US Treasury yield spiking as high as 5.18%, the highest level since 2007. This sharp swing in a key macroeconomic indicator is directly forcing bitcoin and other risk assets to contend with severe capital diversion pressure.
The resurgence of inflation expectations combined with the energy crisis forms the core driver pushing yields higher. The average rate on a 30-year US mortgage has climbed to 7.45%, up 150 basis points in just six months and touching its highest level since 2023, when inflation was still above 6.4%.
Data compiled by Woofun AI shows the 10-year Treasury yield rose about 30 basis points over two days, with the single-day gain the largest since the "Liberation Day" of April 9, 2025. Looking back, the 2007 global financial crisis and the recession that followed pushed yields down to near zero, and during the 2020 COVID-19 shock the benchmark yield even fell below 0.50%. Before the US and Israel attacked Iran, however, the yield was only 3.97%, and the oil price surge triggered by geopolitical conflict quickly changed that picture.
Brent crude has reclaimed $105 a barrel, and diesel prices have hit a record high, just as global diesel consumption enters a seasonal peak with growth of 2 million barrels per day. The gasoline price truck drivers pay is now double what it was nine months ago, and US consumers expect annual inflation to reach 4.6%, the third-highest in a year, making a 4% inflation rate look particularly reasonable against that backdrop.
Growing certainty about a policy shift has further intensified market turbulence. Although Kevin Warsh, the new Federal Reserve chair appointed by Trump, had previously made the market lean toward betting on rate cuts, that logic was completely overturned eight days ago. The Fed voted unanimously to raise rates by 25 basis points, the first unanimous vote in more than a year since May 2025, after months of internal debate and a bias toward cutting. The central bank made clear it will achieve price stability, and Kevin Warsh placed the Fed's 2% inflation target at the core of policy. Traders now expect about 100 basis points of additional hikes by next summer. Bond market trading suggests officials should have raised rates by 50 basis points rather than 25 last week, and the US Treasury's efforts to calm the market failed to stop yields from climbing, with yields across maturities resuming their rise after a brief pause.
Asset spillover effects have emerged, with mortgages, stocks, gold and cryptocurrencies all hit. The US long-term mortgage rate has topped 7% for the first time since early 2025, with the latest average at 7.45%, and hefty monthly payments are weighing more heavily on homebuyers. The stock market rally has slowed because of the jump in Treasury yields, while gold and cryptocurrencies are also under pressure due to their non-yielding nature. For crypto traders, bitcoin and other digital assets pay no fixed income, and when the 10-year Treasury yield is near 5.18%, their appeal is far greater than when yields are near zero, with capital flowing from volatile assets into safer debt. In addition, Washington must sell large amounts of debt to finance the deficit, and increased supply pushes bond prices down and yields up. Looking ahead, inflation could reach 3% to 4% or even higher by mid-2027, the dollar's purchasing power has already fallen about 40% over the past decade, persistent deficits and inflation will worsen the situation, and the bond market is demanding higher investment returns.
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