What I don't get is why long dated bond yields have been going higher across the western world while headline inflation has been falling. Is the market anticipating more inflation in the long run or were investors hurt by the rapid increase in short term rates for the last few years demand that they are compensated in case it happens again? What is even more puzzling is that the Big Beautiful Bill has barely moved the 10 year treasury yield despite the projected fiscal deficits that the US Government will incur in the next 10 years.
My best guess is that market now "know" that any problem will be "solved" by government spending. So ever if current inflation looks okay, the trend will be higher for government spending. UK is a good example where labour tried austerity and its own MPs shot it down.
Great anecdote on Andrew Green
Him and Gordon Grender were real characters
What I don't get is why long dated bond yields have been going higher across the western world while headline inflation has been falling. Is the market anticipating more inflation in the long run or were investors hurt by the rapid increase in short term rates for the last few years demand that they are compensated in case it happens again? What is even more puzzling is that the Big Beautiful Bill has barely moved the 10 year treasury yield despite the projected fiscal deficits that the US Government will incur in the next 10 years.
My best guess is that market now "know" that any problem will be "solved" by government spending. So ever if current inflation looks okay, the trend will be higher for government spending. UK is a good example where labour tried austerity and its own MPs shot it down.