BlackRock Warns Bonds Are Losing Their Hedge as Institutions Weigh Crypto Exposure
The firm links the weakening hedge to heavier debt issuance, elevated rates, policy shocks that turn duration into a second source of risk.
Overview
- Ultra‑long Japanese government bonds slumped this month, with the 40‑year yield briefly above 4%, which BlackRock cites as a concrete warning on duration risk.
- BlackRock says it has been tactically underweight long‑term JGBs since 2023 and shifted underweight long‑duration U.S. Treasuries in December 2025 on rising sovereign and expected corporate issuance.
- The BlackRock Investment Institute argues policy shocks now drive bond drawdowns, eroding the classic 60/40 framework that relied on long‑dated sovereigns to offset equity selloffs.
- The note advises clients not to assume government bonds will automatically provide crisis protection, highlighting thinner foreign demand and greater vulnerability in long maturities.
- With Bitcoin near $88,000, Ether around $2,950, and Solana near $199, coverage reports some institutions are considering these cryptocurrencies as alternative convex exposures.