Columbia Threadneedle Investments’ global head of fixed-income strategy, Al-Hussainy, sees no letup for the long end of the U.S. Treasury yield curve. Persistent high long-term yields, he argues, are being driven by swelling fiscal deficits and a stubborn term premium. That combination, he warns, could redirect capital flows and undercut the appeal of digital assets.
Why yields stay high
The U.S. government’s borrowing needs show no sign of shrinking. Al-Hussainy points to fiscal deficits as a primary force keeping long-term yields elevated. On top of that, investors are demanding a higher term premium — the extra compensation for holding longer-dated bonds — because of uncertainty around inflation and the path of monetary policy. The result: a yield curve that stays stubbornly steep at the long end, with no relief in sight from the forces that have pushed it there.
Capital flows on the move
When long-term Treasury yields remain high, they become more attractive to global investors seeking safe, decent returns. That can pull capital away from riskier assets. Al-Hussainy suggests this dynamic is already playing out. Money that might have flowed into emerging markets, corporate bonds, or alternative investments is instead being parked in U.S. government debt. The shift isn’t dramatic yet, but it’s persistent — and that’s what worries him.
Digital assets under pressure
Digital assets, from Bitcoin to tokenized securities, have long pitched themselves as a hedge against fiscal profligacy and loose monetary policy. But if high long-term yields are a symptom of those same deficits, the narrative gets complicated. Al-Hussainy sees a direct challenge: when real yields on Treasuries rise, the opportunity cost of holding non-yielding digital assets climbs. The appeal of crypto as an inflation hedge fades if bonds start offering a real return again. He doesn’t predict a crash, but he does say the environment is becoming less friendly for digital assets.
The big question now is whether the Federal Reserve’s next moves — or the Treasury’s debt management decisions — can alter the trajectory. Al-Hussainy isn’t betting on it.
