10-Year Treasury Yield Hits 5%, Bitcoin Rally Hits a Wall

Zaid Admani (0:00)

Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zaid Admani, and today is Tuesday, September 15th. In today's episode, we'll break down why the 10-year treasury yield just hit its highest level since 2007, and why the Fed may have no choice but to raise rates tomorrow. We'll also tell you why Bitcoin's rally is stalling, and what Bank of America's CEO said sparked a sell-off in bank stocks. Then stick around to the end of the show to find out how much it really cost to own a car in America. We got a great show for you today.

Let's go.

Stocks were in the red to start the week. The S&P 500 fell about half a percent on Monday, while the NASDAQ dropped by 0.6%. Most of the sell-off yesterday was concentrated in tech and AI names. The semiconductor index, for example, fell nearly 6% yesterday, after Anthropic CEO Dario Amadei and other AI CEOs called for a slowdown in AI development over safety concerns. We covered that story in detail on yesterday's show, so go check that out if you missed it. I had some pretty strong opinions, and I've gotten some really great feedback on it in the comments, so thank you to everyone that took the time to reply. Now, we'll have to see if this AI slowdown narrative will be a drag on the stock market. I don't think that it will. I think the bigger story continues to be the bond market, the oil prices and the Fed. Treasury yields continue to move higher. The 10-year treasury yield is now trading higher than 5% as of this morning, which is its highest level since 2007 And remember, the 10-year treasury yield is the most important benchmark in the finance world. It basically impacts the cost for borrowing across the economy. Mortgage rates, corporate borrowing, all of it gets influenced by this number. So the higher the 10-year treasury yield goes, the more expensive it gets to borrow money. On top of that, the higher the yield, the less attractive stocks become because investors can lock in a guaranteed 5% return risk-free. So many investors may choose to take their money out of stocks and put it into bonds. The bond market could be the biggest headwind on the stock market as we close out the year. And remember, we have a Fed meeting this week, which kicks off today and wraps up tomorrow. At this point, the market is totally convinced the Fed will be hiking interest rates at this meeting. The odds of a 25 basis point hike has jumped at 93%, according to the CME Fed Watch Tool. Now, regular listeners know I was in the can that the Fed would wait on rate hikes until next year, or at least after the midterm elections in November. But maybe at this point, the Fed almost has to hike rates just to maintain credibility with the bond market. You know, if the Fed holds interest rate steady this week while inflation is heating back up, well then bond investors could demand a higher yield to lend the government money. So bond yields could keep going up, which will increase borrowing costs for the government and everyone else. So tomorrow's Fed decision could be the most important one of the year. We're gonna stay on top of everything. We're gonna break it all down here on the show. So make sure you guys are subscribed to the podcast and tuning in every day to stay in the loop.

Let's run through some headlines. Starting with Bitcoin. Bitcoin's late summer comeback has recently run into a wall. And for most of the year, it's kind of been a disappointing year for Bitcoin. Bitcoin peaked around $125,000 last October, then lost roughly half of its value this year, sitting near $60,000 for months, while all the money went to AI stocks. But then in August, Bitcoin surprisingly rallied 25% in one week and the price crossed $80,000. The rally also pushed up prices of other cryptocurrencies. Well, over the last couple of weeks, the rally has fizzled out and the price is back near $76,000. And there might be two reasons why the rally has lost steam. The first one is the Clarity Act. This is the big crypto bill that's been stuck in the Senate for over a year now. This bill would create a clear regulatory framework for cryptocurrencies in the US, including defining what digital assets or securities and which one are commodities. The crypto industry has been really pushing for this. President Trump has been pushing for this, but the bill is still stuck in the Senate. Now the Senate is holding a procedural vote today on this bill, but there doesn't seem to be much optimism that this bill will pass. So that's one reason why the Bitcoin rally has stalled. The other reason is the Federal Reserve. Like I said earlier, the market is pricing in a roughly 90% chance of a rate hike this week. So when rates and bond yields start going up, that reduces investor appetite for risky assets like Bitcoin. Now, I know the Bitcoin bulls like to paint Bitcoin as a hedge against the dollar and inflation, but that's not how Bitcoin has behaved over the last few years. Bitcoin typically acts as a high-risk tech stock. So we'll see. I mean, the next few weeks could be a big one for the Bitcoin is digital gold crowd. If Bitcoin starts rallying again despite these macro conditions, I think the Bitcoin bulls can take a victory lap.