• In today’s Comment we want to discuss the failure of long-term bond yields to rise despite much higher than expected inflation readings and a more hawkish/less dovish Fed. Perceived failure by the way. Forecasts of core PCE inflation of 3% for 2021 and 2022 are pretty mainstream these days (note: for 2021, the Fed is at 3.4% for headline and 3.0% for core). Out of consensus calls have inflation in the vicinity of 10%. But Treasury bond yields haven’t budged.

Here is a chart showing the bond yield at the time of a monthly inflation release


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