NEW YORK, Aug 23 (Reuters) - A recent spike in U.S. bond yields has come alongside muted expectations for inflation, a sign to some bond fund managers that economic resilience and high bond supply are now playing a larger role than second-guessing the Federal Reserve.
Bond yields, which move inversely to prices, tend to rise in an inflationary environment because inflation erodes the value of a future bond payout.
But while higher moves in bond yields in the last several months were often driven by investors pricing in higher interest rates as the Fed sought to tame rising inflation, expectations on the pace of price rises have moved lower in recent weeks.
Long-term Treasury yields account for factors such as inflation expectations and term premiums, or what investors demand to be compensated for the risk of holding long-term paper.
A recent string of strong economic data despite higher interest rates has strengthened investor beliefs that interest rates will remain higher for longer, even if inflation is tamed.
Persons:
Jerome Powell, Jackson, Bond, ”, Calvin Norris, John Madziyire, Anthony Woodside, “, Aegon's Norris, Davide Barbuscia, Megan Davies, Anna Driver
Organizations:
Federal Reserve, Federal, Aegon Asset Management, Investors, Bank of Japan, BMO Capital Markets, Treasury, Securities, Reuters, Fed, Thomson
Locations:
U.S, America