U.S. Treasury yields have surged to their highest levels in 12 months, intensifying headwinds for Bitcoin and raising fresh questions about the Federal Reserve’s next move under incoming Chair Kevin Warsh. The two-year yield climbed to 4.05% during Friday’s Asian trading — a level last seen in June 2025 — while the benchmark 10-year yield jumped to 4.5%, also a 12-month high. The moves came after April’s hotter-than-expected CPI and PPI reports fanned fears that sticky inflation, amplified by rising energy prices and Middle East tensions, may force the Fed to tighten rather than loosen policy.
Markets are rapidly repricing rate expectations. CME’s FedWatch tool now shows a 44% probability of a 25-basis-point rate hike in December, up from just 22.5% a week ago. At the start of 2026, traders were pricing in at least two rate cuts. The shift is stark: the two-year yield has jumped more than 65 basis points since March, and the 10-year yield has climbed roughly 45 basis points over the same period, reaching an 11-month high on Wednesday before extending gains.
Rising yields and the Bitcoin competition
For Bitcoin, the environment is challenging. With the cryptocurrency trading near $81,000 — still below its widely watched 200-day simple moving average just above $82,000 — higher yields increase the opportunity cost of holding a non-yielding asset. “Treasuries are not only viewed as a safe haven, but also form a critical pillar of global financial plumbing,” making yield-bearing government debt an attractive alternative when its returns climb. This dynamic has historically acted as a headwind for both Bitcoin and gold, and gold was trading 0.7% lower at $4,614 on Friday.
Warsh, balance sheet, and the yield curve
Investors are also eyeing the potential policy direction of President Trump’s preferred Fed chair, Kevin Warsh. Trump has long called for lower rates, but Warsh’s perceived openness to faster cuts is colliding with inflation realities. Ryan Swift, chief US bond strategist at BCA Research, warned that dovish talk from Warsh could “be a big problem for the bond market” and risk unanchoring inflation expectations. Meanwhile, the Treasury yield curve is steepening — the 2s10s spread last stood at 48.5 basis points — as traders anticipate the Fed may eventually cut short-term rates while long-end yields remain elevated due to persistent price pressures. Warsh’s views on shrinking the Fed’s balance sheet could further influence term premiums and Treasury supply, adding another layer of uncertainty.
Tokenized Treasuries benefit
Amid the turmoil, one corner of crypto is thriving: tokenized U.S. Treasuries. The total value locked in these protocols has hit record highs above $15 billion, according to data source rwa.xyz, as investors seek on-chain access to high-quality, yield-bearing government debt. The trend underscores how surging rates are reshaping demand within the digital-asset ecosystem, even as Bitcoin struggles to regain its bullish momentum.
