Allison Schrager, Columnist

Not Even Bond Traders Can Predict the Future

Falling yields should be a source of concern, not a sign that inflation is being held at bay.

June 18, 2021 at 10:30 AM UTC

Allison Schrager is a Bloomberg Opinion columnist covering economics. A senior fellow at the Manhattan Institute, she is author of “An Economist Walks Into a Brothel: And Other Unexpected Places to Understand Risk.”

Historically low bond yields don’t provide any special insight to inflation. — Historically low bond yields don’t provide any special insight to inflation.
Source: Bloomberg

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Consumer prices paid by city dwellers in the U.S. rose more than 7% last month and more than 9% in April on an annualized basis. If this keeps up the rest of the year, it will be the highest inflation rate the U.S. has experienced since the 1980s. But fear not, say some investors and the Federal Reserve, the bond market isn’t worried. Yields fell over the last week and remain low by historical levels, even after rising on the back of Jay Powell's speech Wednesday. And if markets aren’t worried, maybe we shouldn’t be either.

But there are reasons to worry about rising prices, and the bond market shouldn’t offer any comfort.