Wall Street’s next selloff could start in the bond market. Veteran strategist Harley Bassman warns that if 20-year US Treasury yields hit 6%, trading rules could unleash pressure equivalent to $110 billion in bond sales.
Stocks and Bitcoin could feel the impact as investors shift toward safer government debt.
Why Is the 6% Treasury Yield So Dangerous?
The 20-year yield stood near 5.68% in Bassman’s October 13 report, just 0.32 percentage points below his warning level.
The problem involves roughly $200 billion in Treasury futures. These contracts let sellers choose which bonds to deliver. When yields climb, longer-dated bonds can become the cheapest option. They also lose more value when rates rise.
Managers seeking to control their exposure may then sell or hedge more bonds, driving prices down and yields higher.
Bassman estimated:
“such a delivery switch would be equivalent to the Treasury auctioning $110bn 20yr bonds over the course of four months,”
That figure measures potential market pressure, not confirmed sales.
Could the Stock Market Be Next?
Higher Treasury yields offer investors more income from government debt and make borrowing costlier for companies. Both can hurt stocks, especially expensive technology shares.
Bank of America’s survey identified another threshold: 5.9% on the 10-year Treasury would prompt managers to favor bonds over equities. On Tuesday, it yielded 5.22%.
What Does This Mean for Bitcoin?
Bitcoin traded around $83,014 on Tuesday. Rising yields can pull investors away from riskier assets, adding pressure to crypto. Bitunix has already linked recent crypto weakness to soaring US borrowing costs.
Neither threshold guarantees a crash. But a sharp rise in yields could hit both markets before either reaches those levels.
Bassman sees a deeper problem in Washington’s 6.2% fiscal deficit:
“…we have a problem of “Trust”, not inflation,”
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