Impact of the 10-year Treasury yield on global financial markets

The 10-year Treasury yield isn’t just a US thing — it’s a heavyweight in global financial markets, influencing everything from stocks to currencies to emerging economies. 

Since the US dollar is the world’s reserve currency and Treasurys are a global safe haven, changes in the 10-year yield send shockwaves worldwide. Here’s how:

Stock markets: Higher Treasury yields can pull money out of stocks, especially growth stocks like tech companies, because investors can get better returns from bonds. In 2021, when yields spiked, tech-heavy indexes like the Nasdaq took a hit as investors shifted to safer assets. This shift can set the stage for how investors approach riskier assets like crypto.Borrowing costs globally: The 10-year yield influences interest rates worldwide. When it rises, borrowing costs for companies and governments increase, which can slow economic growth. For example, in 2022, rising yields contributed to tighter financial conditions, impacting everything from corporate loans in Europe to mortgage rates in Asia.Currency markets: A higher 10-year yield strengthens the US dollar, as investors flock to dollar-denominated assets. A stronger dollar can make cryptocurrencies, which are often priced in dollars, more expensive for international investors, potentially dampening demand. It also puts pressure on emerging market currencies, as their debt (often dollar-denominated) becomes costlier to repay.Emerging markets: Countries with weaker economies rely on cheap borrowing. When Treasury yields rise, capital flows out of riskier emerging markets into US bonds, causing volatility in their stock and bond markets. This can spill over into crypto, as investors in these regions may sell crypto assets to cover losses elsewhere.Inflation and monetary policy: The 10-year yield is a barometer for inflation expectations. If yields rise because investors expect higher inflation, central banks like the Federal Reserve may raise interest rates, tightening global liquidity. This can reduce speculative investment in assets like crypto, as seen in 2022 when aggressive rate hikes cooled markets.

For crypto investors, this global impact sets the context. A rising 10-year yield might signal a tougher environment for crypto prices and yields, especially if global markets get shaky. Conversely, low yields often fuel risk-taking, boosting speculative assets like cryptocurrencies.

Rising Treasury yields: Are safer returns stealing crypto’s yield appeal in 2025?

The 10-year Treasury yield, a critical indicator of global financial health, has shown notable volatility in 2025. As of May 9, 2025, the yield stands at approximately 4.37%-4.39%.

The yield’s movement is driven by factors such as trade tensions, inflation expectations and Fed policy, with recent rate cuts not lowering yields as expected, diverging from historical trends.

In the crypto space, yields are earned through activities like staking, lending and liquidity provision, often offering returns of 5%-10% or higher. However, the rising 10-year Treasury yield poses challenges. 

Research suggests that higher yields on safe assets can reduce demand for riskier crypto yields, as investors may prefer the stability of Treasurys. This competition for capital can lead to lower participation in crypto lending platforms, potentially pushing yields up to attract users, but overall market activity may decline. 

It is because many crypto platforms borrow money to operate, and their borrowing costs are tied to broader interest rates, which the 10-year yield influences. If rates rise, these platforms might pass on higher costs to users, affecting the yields you earn.

How Treasury yields impact stablecoins

Stablecoins like Tether’s USDt (USDT) and USDC (USDC) are closely tied to traditional finance because their value is often backed by assets like cash, bonds or — you guessed it — Treasury notes. 

Here’s how the 10-year yield impacts stablecoins:

Backing assets: Many stablecoins, like USDC, hold US Treasurys in their reserves to maintain their $1 peg. Higher Treasury yields, now at 4.39%, mean that stablecoin reserves earn more income, which could theoretically be passed on to users as yields. Regulatory complexity: Regulatory frameworks in some countries complicate this. In the European Union, the Markets in Crypto-Assets (MiCA) regulation prohibits stablecoin issuers and crypto-asset service providers (CASPs) from offering interest to discourage their use as stores of value, though users can still generate yields through decentralized finance (DeFi) platforms.

Opportunity cost: If the 10-year yield is high, holding stablecoins (which often earn lower yields than riskier crypto) might seem less appealing compared to buying Treasurys directly. Investors might move money out of stablecoins, reducing the capital available for lending and potentially lowering stablecoin yields.Market sentiment: Rising Treasury yields often signal tighter monetary policy (like higher interest rates from the Fed), which can spook crypto markets. In 2023, for instance, when yields hit multi-year highs, crypto prices, including stablecoin-related tokens, felt the pressure as investors grew cautious. This can indirectly affect the yields you earn on stablecoins, as platforms adjust to market conditions.DeFi dynamics: In decentralized finance (DeFi), stablecoins are the backbone of lending and trading. If Treasury yields rise and traditional finance looks more attractive, DeFi platforms might see less activity, which could lower the yields on stablecoin pools. On the flip side, some DeFi protocols might boost yields to keep users engaged.

Notably, there is a growing push for regulations that allow stablecoins to share yields with users, particularly in jurisdictions like the UK and US, where legislative efforts are ongoing. This debate is crucial, as allowing yield sharing could enhance stablecoin adoption, leveraging higher Treasury income, but regulatory clarity is needed to avoid legal risks.

Did you know? Liechtenstein was one of the first countries to pass a full-fledged blockchain law — the “Blockchain Act” — in 2020.

USDC vs. US Treasurys: Where should you park your money?

USDC staking offers higher but variable yields with moderate risk, while US Treasurys provide stable, low-risk returns backed by the government.

When users stake USDC — by lending it on platforms like Aave or Coinbase — they earn variable returns, typically between 4% and 7% APY, depending on demand and platform risk.

US Treasurys, especially 10-year notes, offer a fixed return; the yield stands at approximately 4.37%-4.39%. These securities are backed by the US government, making them one of the safest investments.

While USDC can offer higher yields, it comes with added risks like smart contract bugs, platform failures and regulatory changes. Treasurys, though safer, offer limited upside.

Implications of rising Treasury yields for crypto investors

For crypto investors, higher Treasury yields may reduce risk appetite, but tokenized Treasurys provide a secure alternative. 

If you’re thinking about staking your Ether (ETH) or lending USDC, knowing what’s happening with Treasury yields can give you a heads-up on whether yields might rise, fall or come with extra risks.

For example:

If yields are rising, it might be a sign that crypto yields could get more competitive, but it could also mean global markets are getting jittery. You might want to stick to stablecoins or safer platforms.If yields are low, investors might pour money into crypto, boosting yields but also increasing volatility. This could be a chance to earn more, but you’ll need to watch for risks.

Plus, if you’re using stablecoins to park your cash or earn a little extra, the 10-year yield can hint at whether those yields will stay attractive or if you might find better returns elsewhere. And with its global reach, the yield can signal broader economic shifts that might affect your crypto strategy.

Also, stablecoin holders may benefit from higher reserve income if regulations evolve to allow yield sharing, particularly in the US, though EU restrictions push yield generation to DeFi. Alternatively, traditional investors can explore tokenized Treasurys for blockchain-based Treasury exposure, potentially integrating them into broader portfolios as regulatory clarity emerges.

A notable development in 2025 is the rise of tokenized Treasurys, digital representations of US Treasury bonds on blockchains. As of May 4, 2025, the total value of tokenized Treasurys has reached $6.5 billion, with an average yield to maturity of 4.13%, according to analytics from RWA.xyz. This trend offers crypto investors a way to earn yields comparable to traditional bonds, potentially mitigating the impact of rising Treasury yields on crypto markets.

Moreover, the emergence of tokenized Treasurys signals a blurring of lines between traditional finance and decentralized ecosystems. These blockchain-native representations of government debt instruments not only offer yield stability but also reflect a broader trend: the integration of real-world assets (RWAs) into crypto markets. This development has the potential to reshape risk management practices, attract more conservative capital, and accelerate regulatory engagement with digital assets.