Bond Market Reprices Risks of Higher Inflation and Reduced Central Bank Power

Goldman Sachs' George Cole is warning that the bond market is not just waiting for a hidden technical problem to be uncovered, but is instead repricing the world in light of rising inflation risks and reduced central bank flexibility.

The orderly rise in yields and muted rate volatility support this view, suggesting that fundamentals rather than forced selling are driving the global bond repricing.

In the US, the front end has regained control of Treasury curve behavior, making next week's inflation data a decisive input into September Fed pricing.

European rates remain hostage to natural gas prices, but Bunds appear better insulated than Gilts, where the energy shock hits both monetary and fiscal policy.