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Welcome back. The week is about over, and I promise next week we won’t talk about inflation at all. I really mean it this time. But today we will.

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Why bonds are ignoring higher inflation

The consumer price index came in a bit hotter than expected on Thursday, with core inflation at 3.8 per cent, but government bond yields didn’t move. In principle this is a little weird. Inflation is bad for bond prices, so it should drive yields up. But bonds’ indifference is not unexpected. Bond yields peaked back in March. Since then the story has been “look at the 10-year note, it says inflation will be transitory, everything is cool” or alternatively “look at the 10-year Treasury, it says that investors think inflation will be…

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