Bond Yields Returning To Normal

Executive Summary: My bond market outlook over the past 40 years was misrepresented in a Bloomberg story on Friday. To set the record straight, I was bullish on bonds from 1983-2021, not regularly predicting a return of the Bond Vigilantes as reported. … But they are back now, driving up the 10-year Treasury bond yield on concerns about the mounting federal deficit. The Bond Vigilantes still care about inflation (which is moderating), but they also care more about supply and demand than in the past, with the federal government straining both (via fiscal spending and QT). … What’s next? We think the Treasury bond yield is returning to normal around 4.50%-4.75% as the economy returns to its Old Normal.