Inflation Expectations Vs. 10-Year Treasury Yield - The (2nd) Great Conundrum

2025-05-07 14:35:00 ET

Summary

• The 10-year Treasury yield rose from 3.5% in 2003 to 5% in 2007, but the move in early 1987 was much, much faster, and much more damaging.
• The disconnect between inflation expectations and the 10-year Treasury yield isn’t being labeled a new conundrum yet, but it’s puzzling for sure.
• The Fed Chair is now forced to wait and see how the tariff policy changes impact pricing and thus inflation through the 2nd quarter and even into the 3rd quarter.

The first Great Conundrum was in the early 2000s after the 2001 – 2002 50% bear market in the S&P 500 and the start of Gulf War II in March, 2003. Alan Greenspan started hiking the fed funds rate (if memory serves correctly, in 2004–2005 (?), but the Treasury yield curve started flattening out....

Read the full article on Seeking Alpha

For further details see: