I had previously thought that all the current hoo-ha about inflation was misplaced on the grounds that bond markets weren't pricing it - presumably if inflation were such a severe problem then the 10 year US treasury market, one of the most efficient in the world, would be reflecting this with higher yields? Since that is not the case, we must be worrying about something just because we like to worry.
Unfortunately, history does not really support this argument. Looking back to the 1960s, the 10 year US Treasury was certainly not pricing in the coming period of inflation. In fact, it was not until inflation really started to kick in the later 1960s and 1970s that the market really responded by marking down treasuries.
...so much for that argument then (and probably best to avoid treasuries!)
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