U.S. Treasuries are no longer a safe haven—down with the stock market, with Bitcoin taking the brunt first

Author: CryptoSlate / Andjela Radmilac

Compiled by: Deep Tide TechFlow

Deep Tide TechFlow Intro: Over the past 20 years, the hedge relationship between falling U.S. Treasuries and rising stocks—and between falling stocks and rising Treasuries—has completely broken down. Now the two are declining in sync, which means the last “shock absorber” in investment portfolios has disappeared. And Bitcoin, sitting at the far end of the risk-asset curve, is now taking double pressure.

For the past 20 years, U.S. investors have basically enjoyed a free insurance policy: when stocks fall, Treasuries rise, partially offsetting losses elsewhere in the portfolio. So dependable has this relationship been that the whole industry has built products around it. Entire generations of asset allocators treated it as a given.

But this mechanism stopped working around 2020, and it still hasn’t come back.

UBS now calculates the two-month rolling correlation between the S&P 500 index and the 10-year U.S. Treasury yield at -0.69, the lowest reading since 1996.

This means stocks and bonds are moving in sync to a degree not seen in 30 years. The asset that should have offset stock losses is now becoming the source of losses instead.

If bonds are no longer a safe haven, what is?

It’s easy to say the reason bonds and stocks are converging is that investors have lost confidence in U.S. government debt. But as usual, the answer is far more complicated. The data show that investors still want the safety they traditionally seek from bonds—but now they want safety without duration risk.

Duration measures a bond price’s sensitivity to interest-rate changes. A 30-year U.S. Treasury nominally protects the holder from default risk, but it is fully exposed to inflation and the policy-rate path. Although these are two different risks, the distinction mattered less after the 2008 financial crisis because inflation was basically dormant.

Once inflation rears its head, the hedge fails. The correlation between stocks and bonds depends less on the actual level of inflation and more on inflation volatility. It also depends on what is driving the market: news about growth or news about inflation.

When growth dominates, stocks and bonds respond in opposite directions—weak growth hurts stocks but benefits bonds. When inflation dominates, they move together, because higher inflation harms both in the same way. AQR research found this explains about 70% of the long-term changes in the U.S. stock-bond correlation, and similar results have been found internationally.

Since 2022, inflation has been the dominant factor—and for longer than we’ve seen at any time in the past. Even cooler inflation data, like the June report—pulling overall CPI to 3.5% and sending the 30-year long yield back to around 5%—didn’t change anything, because the problem is inflation volatility, not any single reading.

The 30-year U.S. Treasury yield first broke above 5% since 2007. In 2026, most of the time it has stayed above that line; as of July 16 it was around 5.1%. Earlier this year, a new $25 billion 30-year bond auction cleared at more than 5%—the first time in 18 years that investors received such a high yield on long-dated Treasuries.

U.S. deficits are expected to rise from about 5.8% of GDP in 2026 to 6.7% by 2036. Meanwhile, net interest payments as a share of the economy are increasing every year. Governments across OECD countries will need to raise roughly $18 trillion in total this year.

Just as supply is thickening, foreign demand is thinning. In Q1, Japanese investors net sold $29.6 billion of U.S. government, agency, and local debt—the largest net selling since 2022—because domestic yields finally became worth holding. Japan’s 10-year yield has climbed to the highest level since 1997, and Germany’s 10-year bund reached a 15-year high. The global bid that has suppressed long-end borrowing costs for 20 years is pulling back in multiple places at the same time; the term premium is the price of that retreat.

All of this tells us investors are buying U.S. dollars, short-term Treasury bills, and short-term Treasuries—high liquidity, with almost no duration risk. They are selling the long end because the long end carries all the duration risk. This is a 180-degree reversal of the safe-haven trade—and it explains why the dollar has stayed firm even in the week when 30-year Treasuries were dumped.

So where does Bitcoin fit in?

Bitcoin is now as sensitive to macro conditions as the dollar and gold.

BTC has performed well amid falling real yields, a weakening dollar, looser financial conditions, and investors seeking alternatives to traditional assets. A rise in Treasuries would simultaneously deliver the first three—so when the bond market falls, it removes all three supports at once. This is why the rebound that pulled Bitcoin back above $64,000 this week coincided with a dip in front-end yields triggered by a mildly warm inflation report.

Goldman Sachs reached a similar conclusion from another angle, warning that rising yields have compressed the equity risk premium to the point where investors holding stocks are barely compensated relative to risk-free assets. The 10-year U.S. Treasury yield has spent most of 2026 above this threshold; only after this week’s cooler data has it eased to around 4.55%.

Bitcoin is pushed further along the same curve than stocks, meaning it absorbs both pressures at the same time. Higher risk-free yields raise the opportunity cost of holding non-yielding assets. Stock declines reduce the risk appetite that funds stock positions.

Neither of these is a crypto-specific problem, so it can’t be solved by crypto-native news. That’s why regulators’ progress in Washington has repeatedly failed to hold up demand this year.

But despite the correlation, this isn’t a contest between Bitcoin and U.S. Treasuries. Under the inflation-risk aversion mechanism, they’re not fighting over anything. They are on the same side of the same position—selling duration and volatility, adding cash. Gold, long Treasuries, and Bitcoin can all fall in the same week, while the dollar stays strong. That tells us how much interest-rate and volatility exposure any would-be holder wants right now.

The fiscal backdrop that produces a 5% long-term yield—deficits, the interest burden, and weakening foreign buying—are exactly the conditions that make fixed-supply assets outside the sovereign credit system attractive to institutional holders.

Some of this capital is already visible in the $15 billion in tokenized Treasuries held on-chain—crypto-native bets on yield rather than scarcity. Bitcoin’s problem is that the conditions reinforcing its long-term logic are hurting it in the short run.

U.S. Treasuries can reclaim the role they played from 2000 to 2019. That requires inflation volatility to fade, growth risk to become the dominant factor again, and the Fed to have room to ease policy when things weaken.

We’ve seen this combination of factors after every prior inflation shock, and nothing so far rules out its recurrence after this one. But a single month of mildly cool inflation data isn’t yet the kind of combination—though it’s the data point that will eventually accumulate toward that direction.

Before then, Bitcoin was trading in a world where the deepest asset category no longer absorbed shocks for anyone. That removed the floor under every risk asset—and the ones removed fastest were the assets waiting to do nothing.