Suddenly lots of talk the 10-year yield will revisit 5%, which is funny just a few months after Rate-Cut Mania.
By Wolf Richter for WOLF STREET.
The 10-year Treasury yield rose to 4.40% on Friday, the highest since November 27. During rate-cut mania in December, the yield had dropped below 3.80%.
Those moves in recent days and weeks added up, and they point to a gradual recognition in the bond market that inflation rates will be higher than what they’d been before the pandemic, that 2% inflation isn’t going to happen, and that the super-low interest-rate environment over the past 15 years – culminating in August 2020 when the 10-year yield was down to 0.5% – is over.
What comes next is unknown, but it’ll likely entail higher inflation of the type seen in the 1990s and before because the Fed isn’t willing to crash the economy and the labor market just to get to 2% inflation.