Benjamin Cowen Expects Bond Yield Peak by Mid-November

Analyst Benjamin Cowen expects the yield on 10-year Treasury bonds to peak by mid-November, having previously recorded 5.342% on October 1. This could reduce pressure on Bitcoin (BTC) and other risky assets. This yield is the highest since early 2002. The Federal Reserve (Fed) raised interest rates in September. Cowen noted that history supports his forecast, as the yield on 10-year bonds peaked between early October and mid-November in 2018 and 2022, the last two years of U.S. midterm elections. After reaching a peak, the yield usually declines from mid-November to December. However, Cowen acknowledges that the pattern is not exact. Previously, he set 5% as a soft target, and the yield exceeded this level. According to him, growth to 5.4-5.6% remains possible.

He believes that the peak of fear may coincide with the Fed meeting on October 28. The probability of a rate hike in October fell from 64% to 17.7% over the week. Cowen argues that the rise in yields is partly due to bond traders' fears that the Fed will not do enough to tighten. He believes the Fed may delay further hikes, citing soft inflation and the state of the labor market. The employment report for September indicated only 29,000 new jobs. Nevertheless, a poor inflation report could trigger the last bond sell-off. If short-term yields fall, the Fed may not raise rates as much. Cowen expects rates to start declining from mid-November, shortly after the midterm elections.

Although Cowen did not mention Bitcoin directly, he suggests that changes in yield should affect risky assets. Bitcoin recently reacted to yield fluctuations, sharply rising after reaching a 24-year high immediately following the release of the employment report, leading to short sales losses of about $27.5 million in an hour. Weak employment data could improve the situation with concerns about further Fed hikes. However, even a potential local peak in yield may provide only limited relief. Cowen still expects long-term rates to rise over the next 10-20 years, which could continue to pressure non-yielding assets like Bitcoin.