Bitcoin is once again facing Treasury yield pressure after Japanese investors sold $29.6 billion in U.S. government, agency, and municipal bonds in the first quarter, the largest quarterly net sale since Q2 2022.
As Bloomberg reported, the trigger was a sudden upturn in the Federal Reserve’s interest rate forecasts as oil prices soared, making the Treasury’s existing position less attractive.
According to data from the Treasury Department’s TIC, as of February 2026, Japan held $1.24 trillion, making it the largest foreign holding, ahead of the United Kingdom’s $897.3 billion and mainland China’s $693.3 billion.
The $29.6 billion in quarterly sales represented about 2.4% of holdings, and the direction of quarterly outflows is tracked by the fixed income desk in a market where prices are driven by marginal demand.
Why Japanese capital is returning home and what it means
Japan’s 10-year government bond yield exceeded 2.6%, the highest level since 1997, while the 30-year government bond yield reached 4% as the market priced in a rate hike by the Bank of Japan (BOJ).
The Bank of Japan also reduced its monthly government bond purchases from 5.7 trillion yen in August 2024 to 2.9 trillion yen in the first quarter of 2026, removing a cap that had kept domestic yields near zero for years.
| pressure point | article data | transmission line |
|---|---|---|
| Japan’s 10 year yield | Over 2.6%, highest since 1997 | Domestic bonds become even more attractive |
| Japan’s 30 year yield | 4% | Long-term capital can stay at home |
| Bank of Japan government bond purchases | 5.7 trillion yen → 2.9 trillion yen/month | Central bank yield controls eased |
| Bank of Japan policy division | 3 out of 9 members voted for hiking. | Market prices will tighten further |
| Core inflation outlook for FY2026 | 2.8% | Rising inflation supports policy tightening |
When the Bank of Japan pushed Japan’s yields near zero, Japanese financial institutions had little choice but to look overseas for income, and U.S. Treasuries absorbed much of their capital.
Reuters separately reported that Japanese investors continued selling foreign bonds in April, but the pace slowed to the lowest level in three months.
Mortgage rates, corporate borrowing costs, bank balance sheets, collateral markets and emerging market debt are all key to Treasury yields. If external demand for those bonds weakens, markets may have to offer higher yields to ensure supply, and the tightening trend permeates every corner of global finance.
The OECD’s 2026 World Debt Report predicts that gross borrowing across OECD countries in 2026 will be around $18 trillion, and net borrowing will be nearly $4 trillion, the second highest on record.
Long-term borrowing costs for the G7 rose to the highest level in more than 20 years, with the 30-year Treasury yield hitting 5% in late April and the 10-year Treasury yield rising to 4.54% in mid-May, a 12-month high.
Citigroup warned that increased volatility in Treasuries alone could force risk parity funds to sell up to $130 billion of U.S. Treasuries.
The Bank of Japan kept its short-term policy rate unchanged at 0.75% in April, but three out of nine board members voted in favor of raising rates, and the Bank raised its fiscal 2026 core inflation forecast to 2.8%.
If the Bank of Japan raises interest rates further, domestic government bonds will become even more attractive, reinforcing the rationale for repatriation.
Therefore, the relationship between US Treasury yields and Bitcoin has become a central question in the market. The question is whether higher risk-free returns can cap Bitcoin’s upside before sovereign debt stress strengthens the long-term view.
Why rising Treasury yields put pressure on Bitcoin
Government bond yields are the most direct macro headwind for Bitcoin, and as U.S. yields rise, risk-free rates rise accordingly, making cash and bonds more attractive relative to speculative assets.
A 30-year U.S. Treasury bond with a yield of 5% competes directly with each dollar allocated to Bitcoin. As of May 17th, BTC was trading around $78,000, failing to close above its 200-day moving average of $82,228 for five consecutive sessions.
CME FedWatch projects a more than 44% chance the Fed will raise rates by December 2026, a sharp reversal from the multiple rate cuts the market had expected in early 2026. With April CPI at 3.8%, the case for short-term rate cuts weakens, and long-term high policy risks persist.
If the Japanese sell-off adds sustained upward momentum to U.S. bond yields, Bitcoin will take a hit through rising yields that draw capital into bonds, a stronger dollar that compresses risk assets globally, and the liquidity situation that led to a reversal of Bitcoin’s rally in 2024-2025.
Bitcoin behaves like a high-beta liquid asset in that environment and bears the brunt of risk-off rotation.
Bitcoin bull market
The macro story for Bitcoin will only get stronger if the Japanese sell-off, rising government bond yields, and broader weakness in the G7 bond market add to a measurable deterioration in foreign demand for U.S. Treasuries.
If the largest holders of foreign government bonds are withdrawing as domestic yields improve, global long-term interest rates are at a 20-year high, and OECD governments will need to borrow a combined $18 trillion by 2026, the durability of the U.S. bond market as the world’s risk-free anchor will become a hot topic of debate.
Bitcoin bulls have always argued that excessive sovereign debt is creating the conditions for assets outside the banking system to emerge. The current bond market environment provides more evidence of that argument than in recent years.
The same Japanese repatriation that tightens short-term liquidity also removes one of the pillars that has held down global borrowing costs for decades. As that pillar weakens, the macro context of Bitcoin’s “external money” theory becomes even stronger.
| scenario | Bond market settings | Global liquidity effects | read bitcoin |
|---|---|---|---|
| basic case | Japan remains a marginal seller, but flows remain orderly | Yields remain under pressure and not disorderly | Volatile BTC, susceptible to liquidity |
| bear case | Government bond yields rise further, Japan’s selling accelerates | Rising US yields, strong dollar, falling risk assets | BTC comes under pressure as a high-beta liquid asset |
| bull case | Weak external demand becomes a story for sovereign debt confidence | Investors have doubts about the durability of the government bond market | BTC’s “external money” theory becomes stronger |
| shock case | Volatility in government bonds causes forced bond sales by risk parity funds | Risk of up to $130 billion of US Treasury sales amplifies yield shocks | BTC could sell off first, then rebound if policy liquidity returns |
Treasury yield stress compressing Bitcoin’s short-term price movement and sovereign debt weakness building the long-term macro case for Bitcoin have coexisted across all major interest rate cycles as Bitcoin matured as a macro asset.
Japan still owns more government bonds than any other foreign investor, but it is a marginal seller in a market that will need buyers for $18 trillion in new government bond supply in 2026.
In the case of Bitcoin, this makes Treasury a short-term pressure point and sovereign debt vulnerability a long-term discussion.
(Tag translation) Bitcoin
