- According to El-Erian, Bitcoin (BTC) is emerging as a safe haven asset as US Treasury bonds fall out of favor following the Israel-Hamas conflict.
- The yield on the US 10-year Treasury bond, at 4.9 percent, is at least ten basis points higher than it was the day before the Hamas attacked Israel on October 7.
- The central bank has increased its benchmark borrowing cost by 525 basis points since March 2022 and plans to keep it high for longer.
Mohamed El-Erian, chief economic advisor of German financial services company Allianz, explains his views on Bitcoin and government bonds.
Allianz Chief Economic Advisor Addresses Bitcoin
Bitcoin (BTC) is emerging as a safe-haven asset as US Treasury bonds fall out of favor in the wake of the Israel-Hamas conflict, according to Mohamed El-Erian, chief economic advisor at German financial services company Allianz. El-Erian said in his statement:
“There are people talking about Bitcoins, equities, being ‘safe assets’ because they’ve lost confidence in government bonds being safe assets because of the nature of interest rate risk.”
It is expected that the safe haven asset will be maintained or its value will increase in times of economic and political uncertainty. For decades, investors have considered government bonds, especially those issued by the U.S. Treasury, a safe haven. However, recently, Treasury bonds have not been able to maintain their reputation.
The yield on the US 10-year Treasury bond, at 4.9 percent, is at least ten basis points higher than it was the day before the Hamas attacked Israel on October 7. In other words, the price of the 10-year bond has fallen, a sign that investors are looking for safety in other assets. Bitcoin is up 23% since October 7 to $34,460.
Drawing attention to the increase in the 10-year bond yield since the outbreak of tension in the Middle East, El-Erian said, “We have not seen the flight from quality to safety as you would expect, considering what is happening in the world.”
FED is considering leaving interest rates constant
The Treasury bond market has seen higher volatility this year, with yields showing sharp two-way moves in recent weeks due to uncertain government bond auctions and concerns about the economy, federal debt and the Fed’s policy path. The central bank has increased its benchmark borrowing cost by 525 basis points since March 2022 and plans to keep it high for longer.
