Bonds Analysis by Alfonso Peccatiello covering: United States 10-Year, United States 30-Year, BetaPro US 30 year Bond 2x Daily Bear, 10-2 Year Treasury Yield Spread. Read Alfonso Peccatiello's latest article on Investing.com
When it comes to economic growth, we must consider two angles: structural and cyclical growth.
The ability of an economy to generate structural growth is an important driver behind long-dated bond yields .Cyclical growth trends are driven by the credit cycle, the fiscal stance, earnings growth, labor market trends, and more - the healthier they are, the higher short-end bond yields can be pushed also as a result of a likely tightening from Central Banks that might grow worried about economic over-heating and inflationary pressures in such an environment.
In short, long-term growth expectations were revised higher: the first item of the equation above contributed to pushing 30-year Treasury yields higher.The second component driving nominal bond yields is inflation: but NOT TODAY'S inflation - instead, we are referring to long-term inflation expectations.
That's because consumers and borrowers will tend to make important decisions based on these rather than on volatile short-term trends in inflation.Contrary to popular belief, investors are generally not scared of sticky persistent inflation: the US 5y5y inflation break-even has traded in a 2.45-2.75% range for the last 12 months - that means investors expect US CPI inflation to float around these levels between 2028 and 2033.
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