Bond market narratives: that surging growth and higher inflation is transitory after Covid
Reflecting upon the crushing of yields in the U.S. during the Covid, it indeed appeared to be the conundrum of the day or potentially the week — that multiple interpretations have been proposed, yet one can’t help but circle back to Occam’s Razor, the principle suggesting that the most uncomplicated explanation usually stands as the most accurate one.
In any explanations, one that stands out is the narrative that the U.S. is currently experiencing surging economic growth, but this expansion may not be sustainable. In addition, expectations for continued growth have possibly been priced into the market.
A pertinent reference to explain this phenomenon can be drawn from the New York Times article about Falling Yields For T-Notes Signal Angst Take the yield on the 10-year Treasury note, used as a reliable indicator of Wall Street views on economic growth, has been recorded as falling. This could potentially signal investors’ concerns about economic growth and the possibility of it being unable to withstand its current pace. One reason contributing to this concern cited by the president of Bianco Research is the potential impact of Covid-19 restrictions on growth.
Troublingly, this comes only months after the economy was projected to recover…
