Post by @gritcapital

Long-term borrowing costs are climbing again after Fed Chair Kevin Warsh warned at Jackson Hole that inflation remains too high. Since Friday morning, the 30-year Treasury yield has risen roughly 10 basis points and is now approaching 5.3% — a level that rattled markets in July. But the bond market is telling a more complicated story. Long-term inflation expectations have barely moved. Instead, nearly all of the increase has come from real yields — the return investors demand after accounting for expected inflation. That suggests investors aren’t suddenly pricing in decades of higher inflation. They’re demanding more compensation to lock up money in long-term U.S. debt, potentially because of stronger growth expectations, Fed policy, heavy government borrowing, and greater risk around holding long-dated bonds. Why it matters: higher long-term yields raise borrowing costs across the economy and increase the hurdle for stocks, even if the Fed doesn’t hike rates again. 5.3% is now the level investors are watching.