The Real Reason U.S. Bond Yields Are Stuck
Don’t think it’s because inflation is temporary. It’s more to do with the returns on U.S. debt being far better than what’s on offer in Europe and Japan.
Where’s the yield?
Photo: Bloomberg
Here’s a conundrum. Why, when growth and inflation are picking up sharply, are U.S. bond yields stuck at modest levels? Yields on 10-year Treasuries are lower now than at the end of March, despite this week’s blowout inflation numbers and accelerating growth. The Federal Reserve wants you to believe this is because the inflationary spurt is temporary. It’s got nothing to do with that.
The reason bond prices are stuck is much more to do with the fact that monetary policy is global and that the hedged returns available on U.S. debt are much higher than the insults that pass for bond yields in Europe and Japan.