Bond Market’s Return to Normality
On Tuesday, the market’s best guess at the real, after-inflation, cost of money—the yield on 10-year Treasury inflation-protected securities, or TIPS—hit 1.89%, the highest since 2009 and back well within the range of what once counted as normal for the economy.
America has put the era of low rates behind it. Can it cope?
The danger is that during the decade-plus of near-zero—and often below inflation—interest rates that followed the 2008-2009 financial crisis, the economy became reliant on cheap money.
Many of the reasons for the upward shift in real yields aren’t about growth, but about changes to the world that make it more inflationary at any given level of growth, meaning higher rates are needed just to stand still on inflation.
James Mackintosh Wall Street Journal 16 August 2023
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