What's Happening?
Michael Howell, a prominent liquidity expert and founder of Cross-border Capital, forecasts that 30-year U.S. Treasury yields are likely to reach 6%. This projection is based on nominal GDP growth running between 6% and 8% annually, a rate not seen since
the early 1980s. Howell emphasizes that this 6% yield level is critical for refinancing, as private sector borrowings arranged at lower rates will need to be rolled over. He suggests that while this might not immediately trigger a recession, it will act as a significant constraint on economic growth. Furthermore, Howell believes that 2026 will not be a strong year for Bitcoin, attributing its recent underperformance to declining global liquidity caused by the AI capital expenditure boom and a substantial federal deficit, rather than Federal Reserve tightening. He argues that Bitcoin tracks wholesale financial market liquidity, not conventional M2 money supply.
Why It's Important?
Howell's predictions have significant implications for U.S. financial markets and the broader economy. A 6% yield on 30-year Treasuries would increase borrowing costs for the U.S. government, businesses, and consumers, potentially slowing investment and economic expansion. Higher refinancing costs could strain companies and individuals who borrowed at lower rates, leading to increased financial instability. For the cryptocurrency market, Howell's view that Bitcoin's performance is tied to wholesale liquidity rather than M2 challenges conventional wisdom and suggests that investors should focus on different metrics. His assessment that AI capital expenditure and the federal deficit are draining liquidity from financial markets highlights a potential shift in how economic growth drivers impact asset prices, with real economy momentum potentially crowding out financial market liquidity.
What's Next?
If Howell's predictions materialize, the U.S. economy could face a period of slower growth due to higher interest rates and increased refinancing burdens. Businesses might scale back investment plans, and consumers could see higher costs for mortgages and other loans. The Federal Reserve and Treasury Department will likely monitor these developments closely, potentially adjusting monetary and fiscal policies in response. For Bitcoin and other cryptocurrencies, investors may need to recalibrate their expectations for 2026, focusing more on global liquidity trends and real economy capital flows rather than traditional monetary aggregates. The market will be watching for signs of the global liquidity cycle bottoming out, which Howell anticipates around mid-2027, as a potential catalyst for future cryptocurrency growth.
Beyond the Headlines
Howell's analysis points to a deeper structural shift in the global financial landscape, where the massive capital expenditure in areas like artificial intelligence and significant government deficits are re-routing liquidity from financial markets into the real economy. This could signal a long-term trend where traditional financial assets might face headwinds as real economic activity becomes a more dominant force in liquidity allocation. The debate over which liquidity metrics are most relevant for financial assets like Bitcoin also highlights the evolving nature of financial markets and the need for more sophisticated analytical frameworks. This shift could lead to a re-evaluation of investment strategies, with a greater emphasis on understanding the interplay between real economic growth, government spending, and global liquidity flows, potentially altering the risk-reward profiles of various asset classes.
