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Inflation Versus 10-Year Treasury Yields

We recently received the United States Bureau of Labor Statistics inflation data for the month of March, which came in at a red hot 8.56% year-over-year (marginally above the 8.4% consensus). As what seems to be in direct response to higher inflation and negative real yields, treasury markets continue to sell off with the 10-year rising to over 2.7%, up from 1.5% at the start of the year.

Together, the increasing inflation rate and the 10-year treasury yields create what we think is the most important macroeconomic chart right now. We continue to see a period of financial repression play out as inflation is magnitudes above bond yields, which produces guaranteed losses for investors who rely on these risk-free rates.

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