The US financial market is experiencing a fundamental regime shift as real yields, adjusted for inflation, sustain their highest levels in over a decade. Driven by a resilient US economy, persistent inflation, and the Federal Reserve’s commitment to keeping interest rates elevated, this transition marks an end to the post-2008 era of ultra-low and negative real rates. Investors are adjusting to this new environment, which raises borrowing costs across the economy and increases the hurdle rate for riskier assets like equities.
- US real yields, represented by Treasury Inflation-Protected Securities (TIPS), have transitioned from negative territory to sustained positive levels.
- The Federal Reserve’s “higher-for-longer” monetary policy stance remains a primary driver behind the structural upward shift in yields.
- A resilient US economy and persistent inflationary pressures continue to support elevated interest rates.
- Higher real yields increase the hurdle rate for equities, making bonds a more competitive alternative for investors.
- This regime shift increases borrowing costs for corporations and consumers, impacting global capital flows and asset valuations.
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When did we all start using the word “Regime” so much!
It’s very noticeable
Blah blah blah
Lmao the Fed back stopping the Treasury so they can do stealth QE manipulate the long end. VERY INDEPENDENT AND BRAVE OF WARSH. gtfo
Fed has been buying more treasuries for the last 6 months, Fed has zero credibility when it comes to inflation.
This Fed is not hawkish. They’re an ostrich, burying its head in the sand and changing the inflation target for 2 to 2.9%.
Stronger US DOLLAR! Let’s go!