The 2-year treasury yield comes under pressure again as Bitcoin plunges: the effects of Trump's new tariffs

Global financial markets are experiencing a period of turbulence. The yields on 2- and 10-year U.S. Treasury bonds have reached critical levels, compressing the riskiest sectors of the economy. Meanwhile, bitcoin has suffered a sharp decline, dropping to $78.74K with a daily decrease of -6.29%, reflecting the tightening of credit conditions worldwide.

How Treasury Rates Shake Up Global Markets

The 10-year U.S. Treasury yield has hit 4.27%, the highest in the last four months. This increase is not an isolated event: it signals a fundamental shift that impacts the entire global economy. The 10-year yield serves as the “risk-free” benchmark rate worldwide, establishing the minimum cost of financing for every economic operator, from Chinese and Japanese central banks to domestic financial institutions.

When this yield rises, all other rates tend to follow upward. Banks, in fact, add a premium on the 10-year yield to lend to non-sovereign entities, incorporating the additional risk. As a result, mortgages, corporate loans, and consumer financing become progressively more expensive. Analysts refer to this phenomenon as a “financial tightening,” which discourages investments and compresses consumption.

The increase in 2-year Treasury yields, the segment most sensitive to short-term monetary policy expectations, signals further constraints on liquidity expectations. This dynamic creates particular difficulties for high-risk assets like bitcoin and other cryptocurrencies, where investors retreat in search of protection.

Trump’s Tariff Threats: The Catalyst of Volatility

The likely trigger for this spiral is the tariff threats from President Donald Trump towards Europe. Over the weekend, Trump threatened to impose an initial 10% tariff on imports from eight European countries starting February 1, escalating to 25% from June 1, contingent upon reaching an agreement on Greenland.

This statement has raised fears of retaliation from European investors, including possible sales of U.S. Treasury securities. Since bond prices and yields move inversely, large sell-offs would further spike yields. Europeans could theoretically tap into their $12.6 trillion in U.S. asset holdings, although most are held by private entities rather than governments, making a coordinated response difficult to implement.

European leaders have strongly criticized Trump’s stance, denouncing it as a violation of free trade principles and planning their own retaliatory measures.

Effects on Financial Assets: A Global Chain Reaction

The pressure is not limited to bitcoin alone. Technology stock indices, sensitive to interest rates, have experienced significant declines. Nasdaq futures have fallen over 1.6%, reflecting the sector’s distress, which is most exposed to rising capital costs.

The impact extends beyond U.S. borders. Japanese government bond yields have surged in response to Prime Minister Sanae Takaichi’s proposal to cut food taxes, suggesting increased fiscal spending and a rise in bond supply. A similar pattern emerges in advanced European economies, where markets are incorporating expectations of higher budget deficits and growing bond issuance.

This global “repricing” of 2- and 10-year treasury yields marks a critical moment for investors. Assets like bitcoin, historically sensitive to low-inflation and low-interest-rate environments, face an entirely opposite context. The ongoing financial tightening, driven by aggressive trade policies and fiscal expansions, is redefining the attractiveness of high-risk markets in a changing macroeconomic landscape.