Rates Spark: The Evaporation of Real Yields

Rising inflation in the US and Eurozone is pushing real yields toward zero or negative territory, creating a bearish environment for Treasuries and Bunds. Market expectations are pivoting toward rate hikes rather than cuts as central banks struggle to outpace headline inflation.

Key Takeaways

• 1.U.S. inflation is eroding real yields, with April PPI at 6% and CPI approaching 4%, making Treasuries less attractive.
• 2.The Fed, now led by Kevin Warsh, is unlikely to cut rates soon, with markets discounting a higher probability of a hike.
• 3.The Eurozone is experiencing negative real deposit rates (2% rate vs 3% inflation), pressuring Bund yields higher.

Table of Contents

• Inflation here there and everywhere
• Thursday's events and market view
• Author
• Disclaimer

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