Bitcoin Carry Trade Surpasses US Government Debt Yields

The Bitcoin carry trade has gained significant attention as it now offers higher returns than US government debt. On August 7, the annualized Chicago Mercantile Exchange (CME) Bitcoin futures carry reached 5.69% to 7.89%, surpassing the 4.19% two-year Treasury yield recorded on the same day.

The two-year Treasury yield sits at its highest levels since 2007, and forecasters continue to raise their estimates. A Reuters poll predicts calmer bonds ahead, with a median forecast of 4.50% for the 10-year yield in three months and 4.34% in a year.

However, 18 out of 22 bond strategists warn that the 10-year yield may overshoot these forecasts rather than undershoot them. Historically, this has been the case, as seen in March when the same poll series predicted the 10-year near 4.25% a year out, only for it to trade above 4.70% five months later.

The long end is already breaking ranks, with the 30-year yield touching 5.27% on Tuesday, its highest since 2007. This surge in yields is driven by real yields, not inflation bets, as investors seek higher compensation for US deficits and heavy debt sales.