BlackRock warns long-term government bonds have lost their safety role, pushing investors to consider Bitcoin, Ethereum and Solana as alternative risk plays.
Summary
- BlackRock says long-term government bonds no longer act as reliable portfolio ballast as deficits and policy shocks drive correlated drawdowns.
- The firm highlights Japan’s ultra-long JGB selloff and its own underweight stance in long-duration JGBs and U.S. Treasuries, arguing the classic 60/40 playbook is breaking.
- With Bitcoin, Ethereum and Solana trading near cycle highs, some institutions now treat major cryptocurrencies as the convex risk exposure once assigned to sovereign debt.
BlackRock is telling clients to stop treating government bonds as the automatic safety net in a crisis—a shift with direct implications for how capital rotates into risk assets like Bitcoin (BTC) and Ether (ETH).
Bonds Lose Their “Ballast” Role
In its latest weekly note, the BlackRock Investment Institute warns that “bonds no longer provide the same level of portfolio ballast” as fiscal deficits balloon and rates stay higher for longer. Heavier government borrowing and “higher-for-longer” policy have made long-dated sovereigns more vulnerable to abrupt selloffs when “fiscal and trade risks flare up,” the team led by Jean Boivin argues. Instead of cushioning equity drawdowns, spikes in long-term yields are increasingly “morphing into debt-sustainability worries,” amplifying volatility across assets.
BlackRock frames the recent moves in rates less as a classic growth‑inflation story and more as politics colliding with what it calls “immutable” constraints, above all the need for foreign buyers to keep absorbing ever-rising debt issuance. When that foreign bid thins, duration ceases to be a hedge and starts behaving like a second source of risk.
Japan As Warning Signal
Japan has become the pressure point where these abstract risks turn concrete. Ultra‑long Japanese government bonds sold off sharply this month, with the 40‑year yield briefly pushing above 4%, a level not seen since that maturity was introduced in 2007, as investors reassessed the country’s fiscal risk premium. Against that backdrop, BlackRock says it has been tactically underweight long‑term JGBs since 2023 and turned underweight long‑term U.S. Treasuries in December 2025, citing both sovereign issuance and an expected wave of corporate bond supply in 2026.
The firm’s takeaway is blunt: in a market where “policy shocks—rather than recessions alone—can now be a major driver of bond drawdowns,” the traditional 60/40 playbook is breaking. What used to be a stabilizer in multi‑asset portfolios has become a second, correlated bet on policy discipline.
Crypto Steps Into the Vacuum
That breakdown in the bond hedge lands at a moment when major cryptocurrencies are again trading near cycle highs, inviting some allocators to treat them—not Treasuries—as their convex exposure. Bitcoin is changing hands around $88,184 per coin, down roughly 1.2% over the last 24 hours, with a 24‑hour trading volume above 43.5B and a market cap near 1.76T. Ethereum trades near $2,953, with about 23.4B in 24‑hour turnover, while Ether’s price has slipped about 1–1.5% on the day. Solana, meanwhile, is trading around $199.15, essentially flat on the session with a 0.22% drop over the last 24 hours.
In a world where bonds can no longer be relied upon “for portfolio safety,” as BlackRock puts it, that backdrop of deep, liquid crypto markets becomes harder for institutions to ignore. The trade‑off is starker than the old 60/40 formula ever admitted: accept duration risk in increasingly politicized sovereign markets, or embrace the explicit volatility of assets like BTC, ETH, and SOL as the place where risk is at least priced, not denied.
