Call it the "Great Bond Freak-out," as long-term yields have consistently moved higher, as measured by 3-day changes. The direction has been clearly upward, and the moves have been the largest since the Liberation Day debacle. The market has repriced bond risk quickly. Inflation expectations, while seemingly well managed, are above the 2% target. Real rates have risen on higher expected growth and stronger demand for AI financing. Monetary policy is moving to a hawkish stance, which places further pressure on the front end.
The sudden repricing of bond risk should attract attention, but it does not imply bond market irrationality. Perhaps the irrationality was with the false valuations prior to this move higher.
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