Anushka Basu
2 min read
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Bond buyers’ shocking strike leaves BlackRock struggling originally appeared on TheStreet.
Long-dated sovereign bonds, with maturities of 20 years or more, are experiencing a buyers' strike.
A Bloomberg measure of global yields of 20 years or more currently stands at levels last observed in 2008, following a string of under-subscribed auctions in the US, South Korea, Australia, and Japan.
Japan's 30-year auction on June 5 produced its weakest bid-to-cover ratio since 2023, following subdued demand at a prior 40-year auction.
This echoes the same demand signals to keep an eye on ahead of next week's US 10-year and 30-year Treasury bill auctions, according to Reuters.
Institutional giants are voting with their feet. BlackRock says ultra-long Treasuries are becoming "hard to sell" and is underweight US duration due to a mushrooming federal deficit and record issuance.
DoubleLine Capital's Jeffrey Gundlach is even more forthright: he said at the beginning of August that his firm is either avoiding 30-year paper altogether or outright shorting it, according to Bloomberg.
Higher coupons might lure some yield hunters, but pension funds and insurers, formerly captive buyers, can now lock in attractive returns at shorter tenors while taking minimal interest-rate risk.
At the heart of the sell-off is the fiscal sprawl. Washington's divisive "big beautiful bill" could lead to trillions of new debt, while Europe escalates defense spending and Tokyo prepares to offer tariff relief.
Investors are now worried that governments will continue to supply so much that gross market supply will be excessive, forcing yields to rise.
That withdrawal from the so-called "risk-free" asset space is echoing through crypto communities. Bitcoin is currently hovering around $102,963.79, down nearly 2% in the last 24 hours, according to Kraken.
"There is a small possibility that some institutions might consider Bitcoin due to its global liquidity and 24*7 market as an alternative to long-dated bonds. However, we believe that in the current regulatory environment, such a shift will be very slow.
Some institutions might lean toward Bitcoin for its liquidity and robust OTC market, but right now, Bitcoin is mainly being seen as a diversification tool rather than a direct replacement for bonds. Institutions certainly are zealous about Bitcoin as a trading and digital gold, but BTC replacing bonds will take some time." believes Bitfinex analysts.
However, Bitcoin has liquidity 24/7, carries no counterparty risk, and has a fixed supply of 21 million coins. Some portfolio managers are still attaching their portfolios to those radical characteristics, almost like "a hedge" against sovereign profligacy.
