The 10-year UST yield crossed the 3% mark today. So you’d think this was a sign that a modicum of rationality is returning to the bond bits.
But not really. That’s because inflation is rising even faster than interest rates, meaning that real yields on the fulcrum security for the entire financial system are still dropping ever deeper into negative territory. Thus, at the end of March the inflation-adjusted (Y/Y CPI) rate dropped to -6.4% and even with the rise of nominal yields since then it still stands close to -6%.
Here’s the thing, however. For the past 40-years the Fed had been driving real yields steadily lower, although even during the money-printing palooza of 2009-2019, the real yield entered negative territory only episodically and marginally.