Rising US Treasury Yields Challenge Inflation Narrative
US Treasury yields have been rising since the start of the Iran war, leading to a multi-month bond sell-off. The most recent meeting of the Federal Open Market Committee (FOMC) saw the 30-year Treasury yield reach its highest level since 2007.
The two-year yield rose by 76 basis points in this window, with a September rate hike by the Federal Reserve now priced into the markets at 63%, according to CME FedWatch. The five-year breakeven inflation rate, which estimates future CPI inflation, has been trending down since May and currently stands at 2.2%.
This challenges the mainstream narrative that higher Treasury yields are due to inflation expectations from energy prices. Instead, it suggests a rise in real yields, which could have bearish implications for non-yielding assets like Bitcoin.