No Inflation as Yields Jump Belies Point of No Return View

For the first time since 2009, U.S. bond yields are rising at the same time inflation is slowing, providing a cushion for investors in Treasuries whether or not the Federal Reserve slows the pace of its debt purchases.

While 10-year yields reached 2.23 percent May 29, the highest since April 2012, the personal consumption expenditure deflator, the Fed’s preferred gauge of inflation, rose 0.7 percent in April from a year earlier, the smallest increase since 2009. The yield gap between Treasury Inflation-Protected Securities, or TIPS, and non-indexed bonds show investors have cut their expectations for consumer price increases to the lowest level since July.