Bond Market Smells a Rat: 10-Year Treasury Yield Hit 1.04%, Highest since March. 30-Year 1.81%, Highest since February. Mortgage Rates Jumped | Wolf Street

Might the bond market be smelling a rat?

Yes, inflation. The bond market is smelling it. Everyone is smelling it. The Fed is touting its new philosophy of letting inflation run hot for a while – whatever “hot” and “for a while” might mean. The Fed’s inflation measure is “core PCE,” which nearly always runs below “core CPI” which always runs below whatever inflation people are actually experiencing in real life.

Left up to its own devices, the Treasury market with these Fed-inspired visions of inflation, might react more strongly. But the Fed is still buying Treasuries and mortgage-backed securities, and that is keeping a lid on the upward moves. And holders of those securities at those yields will just have to eat the inflation.

Bond Market Smells a Rat: 10-Year Treasury Yield Hit 1.04%, Highest since March. 30-Year 1.81%, Highest since February. Mortgage Rates Jumped | Wolf Street