US Treasury Yields Jump as Bitcoin Soars Amid Fiscal Concerns

US long-term Treasury yields have leapt above 5% driven by fiscal concerns, compounded by Moody’s downgrade. Meanwhile, Bitcoin has achieved record highs, boosted by a weaker dollar and regulatory clarity. This week, focus shifts to crucial Federal Reserve communications and major technology earnings that could indicate market movements.

US long-term Treasury yields have spiked over 5% as concerns over federal fiscal policies rise. The backdrop to this surge includes Moody’s recent credit rating downgrade and worries about the impact of Trump’s proposed tax policies, which could expand budget deficits. In contrast, Bitcoin has soared, setting new record highs thanks to a weakened dollar and clearer regulatory frameworks for stablecoins. This week, all eyes will be on potential Federal Reserve announcements and earnings reports, especially from technology giant Nvidia.

Last week saw a significant sell-off in US Treasury bonds, driven by weak demand at auctions and the looming spectre of President Trump’s tax bill. It pushed both the 20-year and 30-year yields to exceed 5.1%, while the 10-year yield edged above 4.6%. Fed officials hinted at maintaining interest rates steady for now as they examine the broader economic effects.

In the UK, the inflation rate has climbed sharply, jumping from 2.6% in March to 3.5%. This increase has prompted some economists to adjust their forecasts regarding potential rate cuts from the Bank of England, now expecting only one cut rather than two.

Over in Australia, the Reserve Bank made a move to cut its policy rate by 25 basis points to 3.85%, signalling concerns about price stability and labour market pressures amid uncertain economic conditions. Futures markets reacted swiftly, ramping up the likelihood of an additional cut in July from 36% to 57%. Following this, the AUD has seen a slight dip against the US dollar.

In the cryptocurrency sphere, Bitcoin’s continuous rally continues, aided significantly by both a decline in the dollar’s strength and favourable regulatory news on stablecoins. Last week, Bitcoin climbed past its previous all-time high: it now stands at a staggering $111,977. This seems to resonate with investor confidence, evident from lower-than-expected profit-taking activities.

All eyes on market implications of Trump’s new tax plan, dubbed the ‘One Big Beautiful Bill.’ This legislation is estimated to add around $3.8 trillion to the national debt by 2034, largely outweighing potential revenue from Trump’s tariff strategies, projected to generate between $2 and $3 trillion. This news unsettled major US stock indices, while Treasury bonds and the dollar also came under pressure.

Technical analysis points out that the US Tech 100 Index has struggled after failing to break through a resistance at 21,500. Should the index manage to hold above support levels of around 20,500, it could aim for a test of its earlier peak of 22,223. A slip below this level may bring sharper declines, with 19,600 as a crucial support zone.

Meanwhile, Japan’s stock index, Nikkei, is edging closer to resistance levels, as trade talks between the US and Japan progress. Prime Minister Ishiba is expected to meet President Trump at the upcoming G7 summit, where tariffs on vehicles will be discussed, potentially offering some relief to Japan’s economy, which has faced recent contraction.

On the inflation front, Japan’s April core inflation reached 3.5%, driven primarily by food prices, which has consistently outpaced the Bank of Japan’s target, yet the bank remains cautious about hiking rates, given the uncertain global economic landscape.

For Bitcoin, its current momentum continues unabated, being on a record seven-week winning streak. Yet, we might see a correction, especially since sentiment indicators reflect overbought conditions. Support may appear around $102,000-$102,500 before any enduring trend upwards resumes. Notably, Ether, the second-largest cryptocurrency, hasn’t shared the same fortune, underperforming Bitcoin by a considerable margin.

Looking ahead, critical economic data and Fed communications are on the horizon, including inflation statistics from Australia and the US. Major earnings announcements will also make news, especially from Nvidia, which is projected to showcase impressive revenue growth. Investors will be keen to examine whether Nvidia’s developments in AI technology keep pace amid tightening competition in the tech industry.