The US 10Y treasury yield soared 20bps in the past week. There are many potential catalysts behind the move, with Evergrande, a hawkish Fed, the debt ceiling and oil reaching over $80 a barrel all worthy candidates.
Looking at the 10Y breakeven inflation rate, which is a measure of expected inflation (see below), and inflation expectations have barely budged the past 3 months. If the bond market feared that today’s elevated inflation was not temporary, breakevens would be soaring higher, if not faster than nominal yields. This is important to note as it means bonds have an unused catalyst to push on higher from here.