Bond Markets Got It All Wrong When It Comes to Biggest Foe
The disparity is especially important now because the bond market’s outlook is key in helping the Federal Reserve decide just how much interest rates will need to rise from rock-bottom levels.
Photographer: Andrew Harrer/BloombergThis article is for subscribers only.
Inflation is the big enemy of the bond market. But bond investors, it turns out, tend to overestimate their foe.
Since at least 1999, inflation has rarely been as bad as the $12.7 trillion Treasury market has suggested, data compiled by Bloomberg show. In fact, even after investors scaled back their expectations, they still often overstated how much consumer prices would actually rise.