According to The Kobeissi Letter, higher yields are generally viewed as bearish for the stock market because rising borrowing costs slow down economic activity, especially during periods of uncertainty. The Kobeissi Letter further notes that ongoing debates over the US tax bill and increasing deficit spending add to market uncertainty. For crypto traders, this heightened volatility in traditional markets often leads to increased interest in digital assets as alternative investments, potentially impacting Bitcoin and Ethereum trading volumes and price trends (source: @KobeissiLetter, May 21, 2025).

According to @markets, US deficit spending has been supporting elevated yields for over 12 months, directly impacting the 10-year Treasury yield. The divergence between the 10-year yield and the S&P 500 increased noticeably ahead of the trade war, as cited by @markets. Alongside the unwinding of the basis trade, interest rates remain approximately 90 basis points higher than before the widely discussed 'Fed pivot' (source: @markets). For crypto traders, this persistent rate elevation signals tighter liquidity conditions and increased volatility, as digital assets often react to broader risk sentiment shifts stemming from traditional markets.

According to The Kobeissi Letter, the persistent inflation and US deficit spending have led to the US interest expense on national debt reaching a record $1.2 trillion over the last 12 months. This situation necessitates mass issuances of US Treasuries, which in turn causes bond prices to fall as the market becomes saturated with bonds. Traders should monitor bond market movements as they can impact broader financial markets.

According to The Kobeissi Letter, the US government has the potential to create a more efficient and transparent spending system, which could eliminate $5 billion of deficit spending per day. This reduction in deficit spending is crucial for traders as it might influence interest rates and economic stability, directly affecting market volatility and investment strategies.