The 10-year US Treasury yield reached 5.34% this month, marking its highest level since 2002. This rise creates a competitive environment for Bitcoin, which offers no yield, as investors can now secure returns above 5% from government-backed assets with minimal default risk.
Higher yields impact the valuation of assets without cash flows by increasing the discount rate applied to future gains. Consequently, investors require higher expected price appreciation to justify holding Bitcoin over bonds. This shift is reflected in capital flows, with bond ETFs attracting a record $469 billion through September of this year.
Dan Ivascyn, chief investment officer at Pimco, suggests that yields could climb to 6%. He notes that levels at or above 5.5% are likely to cause weakness in risk markets, including credit and equities. Additionally, AI companies are now competing with Treasury borrowing for investor capital through debt sales.
The 10-year yield has increased by approximately 1.2 percentage points during 2026. While liquidity and fund flows can mitigate some pressure, the current bond market environment forces a reevaluation of traditional investment strategies like the 60/40 portfolio.
