"“Treasuries won't do the thing. If you know, they won't really they won't rally if we if this inflation gets worse than the market expects and we think it is going to be.”"
"“Bonds already price in an expected inflation path. If realized inflation runs hotter than that path, bond prices fall, which is the opposite of a hedge.”"
"“His point was mechanical. Bonds already price in an expected inflation path. If realized inflation runs hotter than that path, bond prices fall, which is the opposite of a hedge.”"
Long-duration Treasuries reflect an expected inflation path already embedded in bond prices. If realized inflation runs hotter than that path, bond prices decline, which does not provide protection. Recent inflation readings show core CPI above expectations and core PCE rising across the past year, indicating inflation persistence. Treasury yields remain elevated, with the 10-year and 30-year at 4.46% and 5.03%, so any upside inflation surprise versus embedded expectations would likely pressure bond prices. A multi-asset approach uses four inflation hedges rather than relying on duration alone: cash via short T-bills, inflation-linked TIPS, commodities focused on energy and metals, and additional hedges designed to diversify inflation exposure.
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