Market Volatility Declines as Treasury Yields Retreat Below 4.5% and 5.0%

QCP Capital has highlighted a significant shift in the market dynamics, noting that the volatility of most asset classes is on a decline. This period of calm is attributed to a lack of meaningful news flow and macroeconomic data, leading to a market that has become increasingly numb to negative news. The market's reaction to headlines that would have previously triggered strong responses is now more subdued, indicating a sense of stability.

The U.S. Treasury yields have seen a slight retracement following last week's fiscal turmoil, but the debt-to-GDP ratio remains above 120%. The new bill is expected to add another $3.8 trillion to the national debt, with the 10-year and 30-year U.S. Treasury yields dropping below 4.5% and 5.0%, respectively. Japan's 30-year government bond yield has also fallen below 3%, suggesting that while these levels are historically high, short-term risks have eased.

Market attention is now focused on the upcoming U.S. Treasury auctions of 10-year, 20-year, and 30-year bonds in June. The Japanese Ministry of Finance is also set to issue 40-year government bonds today, with plans to issue 30-year bonds next week. The Ministry of Finance appears to be aware of the market's aversion to long-term bonds and is ready to adjust its issuance strategy to suppress volatility in the long end of the yield curve.

Despite the recent tariff policy, the latest data has been largely unaffected, and both businesses and consumers need time to adjust pricing and spending patterns. These changes may not be reflected in the data until the third quarter. The Fed seems to agree with this view, choosing to overlook recent data unless the economy deteriorates sharply.

Senator Lummis' remarks on stablecoins and Bitcoin strategic reserves have reignited hopes for substantive progress in cryptocurrency policy. Since the inauguration of this administration, progress on digital asset plans has been lukewarm, but this meeting may provide the necessary impetus for restarting White House engagement. Additionally, the Trump Media plan aims to raise $25 billion to join the ranks of companies establishing Bitcoin reserves. If the meeting gains momentum, we may see more companies following the lead of Strategy and Metaplanet, providing new structural buying pressure to the market.

As the current market volatility continues to decrease, companies may choose to hold Bitcoin reserves to provide the market with new structural buying pressure. This strategic move by companies could potentially stabilize the market and create a more sustainable environment for Bitcoin. The decision to hold Bitcoin reserves is driven by the belief that the cryptocurrency can serve as a hedge against inflation and economic uncertainty. By accumulating Bitcoin, companies can diversify their portfolios and protect their assets from market fluctuations. This trend is part of a broader shift in the financial landscape, where traditional institutions are increasingly recognizing the value of digital assets. The move towards holding Bitcoin reserves is also influenced by the regulatory environment, which has become more favorable for cryptocurrencies in recent years. As governments and financial regulators around the world begin to acknowledge the legitimacy of digital currencies, companies are feeling more confident in investing in Bitcoin. This shift is likely to continue as more institutions adopt cryptocurrencies as part of their investment strategies. The decision to hold Bitcoin reserves is also a reflection of the growing acceptance of digital currencies in the mainstream financial world. As more companies and individuals recognize the potential of Bitcoin, the demand for the cryptocurrency is likely to increase, driving up its price and creating new opportunities for investors. This trend is part of a broader movement towards decentralized finance, where individuals and institutions can transact directly with each other without the need for intermediaries. The move towards holding Bitcoin reserves is also a response to the increasing volatility in traditional financial markets. As economic uncertainty continues to rise, companies are looking for ways to protect their assets and ensure their financial stability. By holding Bitcoin, companies can hedge against inflation and market fluctuations, providing a more stable foundation for their operations. This trend is likely to continue as more companies recognize the benefits of holding digital assets.