Hedge fund manager Bob Prince has warned that the recent sell-off in the US government bond market could accelerate, threatening “soaring assets” like cryptocurrencies and blank check companies. Prince, co-CIO at Bridgewater Associates, also links this looming downturn in the $ 21 trillion treasury market to the improving economy as inflation is under pressure.
These two factors could, according to Prince, “cause the Federal Reserve to roll back its stimulus measures.” According to one report, “Fed policy makers are scraping the Treasury Department sell-off as a healthy response to the emerging US economic recovery.”
However, Prince claims that this “surge in cryptocurrencies like Bitcoin is a manifestation of this environment created by the Fed’s loose monetary policy and the incentives provided by the US Congress.”
Meanwhile, the report said that US inflation expectations have risen this year, reaching the price of government bonds and increasing their yields. This, in turn, has already “hit fast-growing tech companies like Netflix, Amazon and Tesla as their elevated valuations were backed by low interest rates.”
Meanwhile, the same report also states that overseas investors, one of the biggest buyers of government bonds after the Fed, have already shown less appetite for US Treasuries as their losses have piled up.
The 10-year Treasury yield recently rose from 0.9 percent at the end of last year to over 1.6 percent. This has resulted in “the worst quarter for treasury investors in over four years,” according to Ice Data Services.
Do you agree with Prince’s classification of cryptocurrencies as soaring assets? You can share your views in the comments section below.
Photo credit: Shutterstock, Pixabay, Wiki Commons, FT, Bloomberg, ICE Data Services,
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