Real yields drive yields higher, causing both bonds and stocks to fall 🔴
Furthermore, the current rise in yields is being driven by real yields rather than equilibrium inflation, meaning that this move is happening because markets are demanding higher real rates as a return on capital, not because markets are concerned about inflation. In anticipation of rising expectations (a concern that could be mitigated by a downward trend in actual data such as CPI/PCE), rising funding costs have a clear negative impact on the prices of different assets, which helps explain why bonds and stocks have fallen sharply over the past month suffered a decline at the same time.
