The bond market is the older, wiser sibling of the stock market, and it doesn't often have a moment. But when it does, watch out.

Investors were rattled Wednesday after an auction revealed weaker demand for 20-year Treasuries than expected. In other words, buyers are demanding higher returns to lend the government money, which reveals that they see those loans as riskier than before.

The price of longer-term bonds has been falling more than shorter-term ones, suggesting that inflation may be faster in the future and that the Federal Reserve will have to keep interest rates higher in the future. The deficit-expanding budget bill making its way through Congress implies that the government will have to borrow even more money, which will increase supply faster than demand.

The bond market has recent form in foiling President Donald Trump, playing a key role in his decision to pause tariffs for 90 days last month.

The bigger problem is that U.S. government bonds are usually the safest investment possible. They don't look that safe anymore.

That's the reason stocks fell back yesterday -- because sentiment is contagious. Meanwhile, Bitcoin hit a record high Wednesday and continued rising overnight, probably because two of the crypto bull arguments prevailed--even though they contradict each other. Crypto can be both a safe haven, and its sensitivity to risk sentiment means it can make big gains. Gold is also still trading close to record highs.

But the market isn't panicking, it's just readjusting. The benchmark 10-year bond yield is higher than it was, but not too elevated by historical standards. Stocks are about flat on the year so far.

It's normal for actions in parts of the market to reverberate to other asset classes. But bonds are the bedrock. When they cause a tremor, it can feel like an earthquake for stocks and Bitcoin.

-- Brian Swint

***

The Bond Rout Worsens, With U.S. 30-Year Yield Above 5%

The bond market's May meltdown has taken a turn for the worse. Long U.S. bond yields pushed through the 5% ceiling on Wednesday, while Japanese bond yields briefly traded at record levels as their prices dropped. A disappointing 20-year U.S. Treasury auction exacerbated the situation.

   -- The 30-year Treasury yield, at 5.089% reached a 52-week high and the 
      highest level since October 2023. Bond yields move inverse to price, and 
      it's the second time this week the 30-year has traded above 5%. That 
      level has generally been the cap on the 30-year for about two decades. 
 
   -- Japan's government bonds have arguably fared worse. Its 30-year bond 
      yield surged to 3.1872%, a record intraday level, according to data 
      dating back to 2006. Yields on Japanese 40-year bonds also hit an 
      intraday record. Long-dated U.K. government bond yields are at their 
      highest levels since mid-April. 
 
   -- Structural issues and macroeconomic concerns are driving the U.S. bond 
      rout. Price sensitive investors like hedge funds have dominated the 
      market lately, subjecting government debt to bigger price moves. In 
      Washington, the tax and spending bill could add $3.3 trillion in federal 
      debt through 2034. 
 
   -- Tariffs are another pain point. They're widely expected to drag on U.S. 
      economic growth. Normally, that would send yields lower as investors buy 
      bonds in a flight to safety. But, a slower economy also has the potential 
      to lower tax receipts, further stressing the deficit situation. 

What's Next: Revenue from companies paying the U.S. import tax was expected to only modestly offset this debt growth. No measurable progress on trade talks recently has heightened investors' jitters. The overall average tariff rate stands at 17.8%, the highest since 1934, according to Yale's Budget Lab.

-- Karishma Vanjani

***

Bitcoin Notches New High as Crypto-Friendly Bills Advance

Bitcoin, the world's largest cryptocurrency, hit a new all-time high above $111,000 late Wednesday as various legislative efforts around digital assets continued to advance, including a Senate bill to regulate stablecoins and a Texas bill to establish a strategic Bitcoin reserve in the state, headed for the governor's signature.

   -- Bitcoin reached $111,875 overnight, passing its previous record set on 
      Inauguration Day, according to data from CoinDesk. Ether, the second 
      biggest crypto, rose to $2,691, while the popular altcoin XRP climbed 4% 
      to $2.44. 
 
   -- Stablecoins are cryptos pegged to a fiat currency, typically the U.S. 
      dollar. The Senate legislation aims to regulate only stablecoins, not 
      Bitcoin, but the bill's advancement toward a full floor vote nevertheless 
      boosted overall sentiment for digital assets. 
 
   -- If approved by Senate lawmakers, the stablecoin bill would need to be 
      reconciled with a version approved by the House Financial Services 
      Committee before a final version is sent to the White House. 
 
   -- Texas is joining a growing movement embracing Bitcoin as an investment 
      strategy. President Donald Trump has vowed to be crypto-friendly and has 
      promoted the idea of a national strategic Bitcoin reserve, funded with 
      the Treasury's forfeited Bitcoin. 

What's Next: Crypto enthusiasts see the potential for wider acceptance of stablecoins and a bigger role for cryptocurrencies in the financial system, analysts told MarketWatch. If enacted, the Senate's Genius Act would be the first legislation in the U.S. regulating the roughly $250 billion stablecoin market.

-- Callum Keown and Janet H. Cho

***

OpenAI Is Bringing the iPhone Designer In-House

OpenAI has been working with iPhone designer Jony Ive for two years, and now they are solidifying the tie-up with a $6.4 billion deal giving Ive and his team design and creative responsibilities at the artificial intelligence firm best-known for ChatGPT. The deal signals OpenAI is working on consumer devices.

   -- OpenAI CEO Sam Altman said Ive's design firm, called io, would merge with 
      OpenAI to work more closely with the research, engineering, and product 
      teams in San Francisco. Ive left Apple in 2019 to found design firm 
      LoveFrom, which has worked for Ferrari, Airbnb, and luxury Italian 
      fashion firm Moncler. 
 
   -- Ive, a chief architect of the iPhone, and LoveFrom are taking over 
      creative and design control at OpenAI, including collaborating on a 
      closely-guarded device to move consumers beyond screens, The Wall Street 
      Journal reported, citing people familiar. 
 
   -- As part of Wednesday's deal, OpenAI will acquire io in an all-equity 
      transaction, and io's roughly 55 engineers, scientists, researchers, 
      physicists and product development specialists will become part of 
      OpenAI. OpenAI acquired a 23% stake in io late last year, people told the 
      Journal. 
 
   -- Apple investors have been looking for signs that its AI software, Apple 
      Intelligence, can be an incentive for people to purchase devices such as 
      the iPhone, Apple Watch, laptops, and the iPad. But Apple AI's rollout 
      has been slower than Wall Street would like. 

What's Next: OpenAI aspires to be a more consumer-centric company focused on mass-market products and impact. Altman recently hired Facebook and Instacart veteran Fidji Simo, an operations-focused executive, to help the company become a profitable and publicly traded company.

-- Angela Palumbo, Mackenzie Tatananni, and Janet H. Cho

***

AT&T Joins Verizon in Building Fiber Network Through M&A

Lumen's fiber optic broadband business was seen as a prize M&A target after Verizon Communications struck a deal to buy Frontier Communications last year. AT&T has emerged with that prize, announcing a $5.75 billion all-cash deal for Lumen's residential business, which includes one million customers in 11 states.

   -- AT&T CEO John Stankey said it is increasing its buildout of the fiber 
      broadband business and expects to roughly double where AT&T Fiber is 
      available by the end of 2030, to about 60 million fiber locations. Lumen 
      had been a speculated target of Verizon's, even after the Frontier deal. 
 
   -- Stankey said the Lumen business, which doesn't include its enterprise 
      fiber business or its mass market copper cable business, will represent a 
      "significant investment" in U.S. infrastructure. Metro areas covered 
      include Denver, Las Vegas, Minneapolis-St. Paul, Orlando, Phoenix, 
      Portland, Salt Lake City, and Seattle. 
 
   -- AT&T expects the deal to close in the first half of 2026, pending 
      regulatory approval. Just last week, the Federal Communications 
      Commission approved Verizon's $20 billion Frontier purchase after it 
      agreed to end diversity, equity, and inclusion programs. 

What's Next: AT&T reiterated its full-year 2025 financial and operational guidance and said it is still committed to repurchasing shares under its previously announced $10 billion authorization, with plans to repurchase at least $3 billion by year-end and the remainder during 2026.

-- Janet H. Cho

***

Classes and final exams are wrapping up on college campuses, and 2025 graduates are preparing to enter an increasingly difficult labor market as questions linger about the future trajectory of the economy.

Young people are also managing their finances in new ways. Generative artificial intelligence can take on the tedious task of budgeting, and the growing buy-now-pay-later industry grants the power to purchase almost anything in installments.

MarketWatch spoke with money experts who offered advice on how to use the latest finance tools responsibly, and to remind graduates not to forget these tried and true personal finance habits.

For more on this, read here.

-- Genna Contino

***

-- Newsletter edited by Liz Moyer, Rupert Steiner, Callum Keown

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 22, 2025 07:07 ET (11:07 GMT)

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