US Treasury yields rise as TIPS challenge the inflation narrative

Key points: Bond yields have been going up since the beginning of the Iran war, widely attributed to inflation expectations due to energy pricesHowever, the five-year inflation expectation priced into Treasury Inflation-Protected Securities is 2.2% and trending down since MayThe driver appears to be rising real yields with bearish implications for yield-free assets like Bitcoin Continuation of Q2 bond sellingAfter yields reached local lows in early March, US government debt has been undergoing a multi-month sell-off. This week, after the most recent meeting of the Federal Open Market Committee (FOMC), 30-year Treasury yields made headlines by reaching the highest level since 2007. In line with the two-year yield rising 76 basis points (bps) in this window, a September rate hike by the Federal Reserve is priced into the markets at 63%, according to CME FedWatch.2Y, 10Y and 30Y US Treasury Yields. Data Source: Treasury.govWith rates at these elevated levels, government bond investments are, for the first time since 2019, more profitable than cash-and-carry trades in the crypto markets, as per Glassnode’s latest research. 2Y US Treasury yield and crypto futures carry trade. Source: Gl...