The Great Bond Migration

“Nominal bond yields are just off the lowest ever made a couple of weeks ago. These extremely low or nonexistent yields do not meet these asset holders’ funding needs. For example, pension funds, insurance companies, sovereign wealth funds, and savings accounts cannot meet their financial needs with these investments so holding bonds assures their failure to meet their obligations.” — Ray Dalio (03.15.21)

I believe the reallocation away from sovereign debt, specifically U.S. Treasuries (USTs), in favor of alternative assets will serve as another long-term tailwind for bitcoin and crypto assets.

Bonds have been a staple portfolio investment for as long as modern portfolio theory has been popular but recently the asset class has come under fire, and for good reason (look no further than Ray Dalio’s latest post titled, “Why in the World Would You Own Bonds When…”, as a reminder of many of the headwinds facing sovereign debt markets).

For starters, increased optimism and stronger growth prospects are one driver of rising inflation expectations, which make bonds like USTs less attractive compared to other major asset classes like equities, commodities, or crypto assets. Meanwhile, we’re seeing a flood of new Treasury issuance – the natural result of multi-trillion dollar fiscal spending packages – which has started to put pressure on U