Bond Yields are Defying Yesterday’s Logic

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Astute bond investors are baffled by rising bond yields. Economic activity is slowing, inflation expectations are falling, the Fed is aggressively fighting inflation, and QT has begun. In the past, those factors were a surefire recipe for a rip-roaring bond rally.

Today bond yields defy yesterday’s logic.

Clearly, something else is at play, and I think I know what it is.

Before I share my theory on why bond yields are rising, let’s review how very dependable yield relationships have been turned on their head this year.