Bridgewater Associates examines the tension between rising inflation and growth pressures and central banks’ efforts to suppress bond yields. Historically, bond yields have anticipated US tightening by less than a month, suggesting markets may not fully price policy shifts until they are close.
Why We Doubt Inflationary Dynamics Will Revert to What They Were Pre-Pandemic
Bridgewater
Jason Rotenberg, Greg Jensen
Article
1 Pages
Key Takeaways
Bonds Rarely Lead: Across 12 US tightening cycles since 1955, long term yields led short term rate increases by just 0.5 months on average
Pattern Extends Globally: Average bond yield lead times were 0.4 months in Europe and 3.0 months in Japan, reinforcing how little advance warning markets historically provided.
Timing Can Vary: US bond yields ranged from leading tightening by 10 months to lagging it by 15 months across the full historical sample.
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