Is the Bond Market Anticipating Peak Inflation?

The 10-year US Treasury bond yield has recently stabilized around 3.00%. That calm reflects a remarkable increase in the comparable TIPS yield that has been offset by a drop in the expected-inflation component of the nominal yield. What's going on? Consider the following:(1) Until the past few weeks, the daily TIPS yield has been highly correlated with the monthly real bond yield, defined as the spread between the nominal yield and the CPI inflation rate on a y/y basis (chart).(2) The TIPS yield fell to a record low of -1.19% on November 9, 2021. It then moved higher, especially this year, closing at 0.67% today. This suggests that investors expect that real interest rates will rise as the increase in nominal rates over the past year will in the short run (i.e., soon) depress inflation.