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Inflation Shocker Out of the U.K. And Rising U.S. Fiscal Concerns Send Global Bond Yields Higher
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Inflation Shocker Out of the U.K. And Rising U.S. Fiscal Concerns Send Global Bond Yields Higher

The rise in U.S. bond yields reflects ever-higher fiscal risks

David Rosenberg's avatar
David Rosenberg
May 21, 2025
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Early Morning with Dave
Inflation Shocker Out of the U.K. And Rising U.S. Fiscal Concerns Send Global Bond Yields Higher
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Highlights

• The rise in U.S. bond yields reflects ever-higher fiscal risks

• U.K. inflation surprises to the upside, pushing back BoE cuts

• Earnings are strong, but guidance cuts dominate the narrative

• Oil spikes on renewed Israel-Iran nuclear tensions

Key Takeaways

• Term Premium Drives Bond Selloff: We start the day with U.S. equity futures trading lower, led by global bond sell-off. The move off the lows in market rates has had zero to do with growth (real rates) or inflation expectations (breakeven levels) but is all due to the surge in the term premium, reflecting ever-higher fiscal risks. The White House has tried to convince everyone that the big, beautiful budget bill will not add a dime to the deficit projection, but the non-partisan Committee for a Responsible Federal Budget estimates that the plan will increase the national debt by at least $3.3 trillion through to the end of 2034.

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