Written by: Xiao Bing, Shen Chao TechFlow

On May 19, during trading, the yield on the 30-year U.S. Treasury bond surged to 5.177%, setting the highest level since August 2007.

The last time the coupon rate of 30-year U.S. Treasuries officially reached 5% was also in August 2007. Two months later, two hedge funds under Bear Stearns collapsed, heralding the onset of the subprime crisis. This is not to say history will definitely rhyme, but when the largest, deepest market in the world—reputed as a “risk-free asset”—pulls yields back to pre-financial crisis levels, you'd better figure out what exactly is happening.

What’s worse is, this time it's not just the U.S.

It's not just the U.S. rising; the entire world is selling off.

If it were just the rise in U.S. bond yields, the story would be simple: market expectations of inflation and interest rate hikes by the Federal Reserve would be all there is.

But what happened in the past week is on a completely different scale.

From May 15 to 18, the long-term bond yields of major developed countries around the globe experienced a rare "coordinated surge":

Japan's 30-year government bond yield broke through 4%, reaching its highest level since its issuance in 1999; the UK's 30-year gilt yield surged to its highest point since March 1998; Germany's 10-year government bond yield hit its highest point since May 2011.

If you overlay these charts, you'll see a chilling picture: In Tokyo, London, Frankfurt, and New York, bond traders across four time zones almost simultaneously made the same decision in the same week: to sell.

According to Bloomberg's statistics, this was the worst week for U.S. Treasuries since the Trump tariff shocks in April 2025, with the 30-year U.S. Treasury yield nearing the cyclical peak of 2023.

Bond traders are the most conservative group of people on this planet. When they start to sell off in sync, the market picks up not just panic, but also that some structural elements are starting to loosen.

What caused the global bond market to crash simultaneously?

Laying all the clues on the table, three main lines intertwine:

The first line is oil.

At the end of February, the U.S.-Iran war began, and tensions in the Strait of Hormuz have persisted for almost three months. In April, the U.S. CPI reached a three-year high year-on-year, with the PPI recording the largest increase since early 2022, up 6% year-on-year. This is not a gentle return of inflation; it's a clear secondary shock.

The logic of bondholders is very straightforward: if inflation cannot be contained over the next five years, then locking in a fixed coupon for 30 years means losing purchasing power for every extra year held. So, they either sell or force the issuer to provide a higher coupon to compensate.

That’s why this round of selling is concentrated in long bonds, 10, 20, and 30 years. The longer the term, the more sensitive to inflation.

The second line is debt.

The U.S. government's fiscal deficit continues to expand, and the number of bonds the Treasury needs to issue is increasing. Auctions for 3-year and 10-year Treasuries both saw demand falling short of expectations, indicating that as yields continue to rise, the capacity for investors to absorb the massive supply of U.S. Treasuries is being tested.

On the supply side, there is an increase, but the demand side is shrinking. Foreign central banks, especially the largest U.S. Treasury buyers over the past twenty years, are reducing their holdings. This is a crucial shift: U.S. Treasuries no longer have a natural buyer.

Japan's situation is similar. The market is concerned that the Japanese government may need to launch an additional budget to cope with economic pressure, and deficit expectations are also deteriorating. The troubles in the UK are more direct; Prime Minister Starmer's political crisis has further shaken market confidence in the UK's fiscal discipline, pushing the 30-year gilt yield to a 28-year high.

The third line is the “credit issue” of central banks.

This is the subtlest layer.

At its most recent meeting, the Federal Reserve kept interest rates in the range of 3.5% to 3.75%. Surprisingly, a division emerged internally, with three of the twelve voting members openly opposing the dovish wording in the statement. This hawkish dissent was interpreted by the market as a warning to the incoming new chairman Waller: don’t think about lowering rates easily.

The interest rate futures market has pushed the probability of a rate hike in December to 44%, whereas at the beginning of the year, the market generally anticipated at least two rate cuts.

The expectation reversal of 180 degrees occurred in less than five months.

What does 5% mean?

Many people have no real feeling for “U.S. Treasury yields.” What does it have to do with your life, your assets, or the little bit of Bitcoin in your account?

To put it simply.

The yield on the 30-year U.S. Treasury bond can be understood as the “water level” for global asset pricing. It is the longest-term return rate on this planet that is closest to being “risk-free.” All other assets—stocks, real estate, gold, Bitcoin, private equity—have reasonable valuations fundamentally built on adding risk premiums above this water level.

When the water level rises, everything has to be recalculated.

To give a specific example: if you have a tech growth stock, the market was originally willing to give it a 30 times price-to-earnings ratio because everyone believes in its cash flow over the next decade. But now, with the 30-year Treasury yielding 5% “risk-free,” that same money in bonds can nearly double your principal in 30 years. Why take the risk of giving an uncertain tech company a 30 times valuation?

Thus, valuations have to shift downwards.

Mortgage rates follow the same logic. The 30-year fixed mortgage rate in the U.S. essentially trails the 10-year Treasury. With the 10-year breaking 4.6%, new mortgage applicants could face rates above 7%. This is why if the 30-year Treasury yield continues to rise above 5%, the pressure may not be limited to the bond market but could spread to real estate, small-cap stocks, high-valuation growth stocks, and any other area that relies on long-term funding to maintain low costs.

As for gold and Bitcoin, their common characteristic is that they do not generate cash flow.

In a zero-interest-rate era, this is not a problem, as your opposing position is a Treasury yielding 0.5%. But now, that opposing position has changed to a Treasury yielding 5%, and things are completely different.

In the past three weeks, Bitcoin's performance has vividly illustrated the concept of “macro opposition.”

In the week when the 10-year Treasury yield broke 4.5% and the 30-year approached 5.1%, the U.S. Bitcoin spot ETF saw a net outflow of about $700 million;

the price of Bitcoin fell from above $82,000 back below $80,000. On the same day that the 30-year Treasury yield surged to 5.18% on May 19, Bitcoin, along with altcoins and risk assets, came under pressure.

The logic chain is simple:

Institutional investors are facing a very specific arithmetic problem: placing $1 million into 30-year U.S. Treasuries secures $50,000 annually for the next thirty years, with near-zero risk; putting the same money into Bitcoin gambles on its ability to outperform this 5% compounded.

The frightening thing about compounding is that 5% over thirty years amounts to 4.3 times. In other words, Bitcoin must outperform 4.3 times over 30 years to “break even” on this opportunity cost. Sounds easy? But the premise is you have to withstand any 50%+ drawdown in between.

This is why “every dollar in Bitcoin is one dollar not earning that 5% return,” and this rotation logic of capital continues to exert pressure on non-yielding assets.

What truly deserves vigilance is another matter

Returning to the 5.18% figure itself.

Many analyses interpret it as “short-term tightening pressure,” and I disagree.

If you take a longer view, the biggest macro background for global asset prices over the past forty years has been the long-term downward trend of interest rates. In 1981, the yield on the U.S. 10-year Treasury was 15%, and by 2020, it fell to 0.5%. Over the full 40 years, the water level has continued to descend. All “value investment logic,” all “60/40 portfolios,” all “technology stock valuation models,” and even narratives about whether Bitcoin can become “digital gold” are built on this long trend.

The current issue is that this 40-year downward trend may have reached its conclusion in 2020.

What we are witnessing is the initial stage where the water level begins to rise in reverse.

“The market is starting to price the Fed's necessity to work harder to suppress inflation,” said Ed Al-Hussainy, a portfolio manager at Columbia Asset Management. This sell-off reflects not just concerns over the inflation path, but also an accelerating economy itself.

If his judgment is correct, then 5.18% is not a terminal point but the starting point of a new range.

A deeper issue is debt.

The U.S. federal debt is approaching $37 trillion. For every 1% increase in interest rates, it means the U.S. Treasury has to pay hundreds of billions more in interest each year. When interest expenses exceed the defense budget, surpass healthcare expenditures, and eventually consume everything, the market will force the government to either significantly cut spending or monetize debt.

Historically, every large debt cycle ends with one of these two paths.

U.S. Treasuries are dubbed “ ballast” because they are the underlying collateral of the global financial system. The capital adequacy ratios of banks, the solvency of insurance companies, the duration matching of pensions, the repo financing of hedge funds, and the foreign exchange reserves of central banks—all these chain links ultimately rest on U.S. Treasuries.

When the price of the ballast fluctuates violently, the entire ship will tremble.

The collapse of Silicon Valley Bank in 2023 was triggered by the losses on the U.S. Treasuries it held. If yields on long bonds above 5% become the norm, who will be the next to float on the surface?

This question has no standard answer. But as an investor, you should at least ask one more question on your asset allocation sheet:

Are the valuation models for these assets I hold still assuming zero interest rates?

If so, please recalculate.

The water level has already changed.