22 OCTOBER 2026
Historically, US Treasury yields have moved closely with inflation expectations.
When investors expect persistently higher inflation, they demand higher yields to compensate for the loss of purchasing power. As a result, inflation expectations and bond yields tend to rise together.
That relationship held during the inflation scare of 2021-22, when price pressures quickly became broad-based and persistent.
This time looks different.
Although inflation concerns have resurfaced (due to disruptions in energy markets), longer-term inflation expectations (blue line) remain relatively well anchored.
Which suggests much of the recent inflation risk has already been reflected in borrowing costs.
If yields continue to rise from here, investors may need to look beyond growth and inflation, towards surging debt issuance, for an explanation.
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