Hedge fund manager Bob Prince warned that the recent selloff in the US government bond market could accelerate and put highly liquid assets such as cryptocurrencies and blank cheque companies at risk. Prince, who co-leads Bridgewater Associates, attributes this emerging decline in the $21 trillion Treasury market to an improving economy and increased inflationary pressures.
Both factors, Prince said, could lead the Federal Reserve to consider withdrawing its stimulus measures. Nevertheless, Federal Reserve officials see the Treasury as a healthy response to the burgeoning U.S. economic recovery, a report explained.
However, Prince argues that this rise in cryptocurrencies such as bitcoin is a manifestation of the environment created by the Federal Reserve’s generous monetary policy and stimulus measures by the US Congress.
At the same time, according to the report, inflation expectations in the US have risen this year, which has affected government bond prices and pushed up yields. This has already affected fast-growing technology companies such as Netflix, Amazon and Tesla, whose high valuations were supported by low interest rates.
At the same time, the same report explains that foreign investors, one of the largest buyers of Treasury securities after the Fed, have already shown less appetite for U.S. Treasury securities as their losses mount.
10-year Treasury yields have recently risen above 1.6%, up from 0.9% at the end of last year. This led to the worst quarter for cash investors in more than four years, Ice Data Services said.
Do you agree with Prince’s classification of cryptocurrencies as highly liquid assets? You can share your thoughts below in the comments section.
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