We envisage an end to the markedly better performance of TIPS than Treasuries since inflation compensation rebounded from an initial, liquidity-distorted, slump at the start of the pandemic. But this view rests on an assumption that inflation will fall back quite quickly from a near four-decade high. If not, our forecast of a rise in the 10-year Treasury yield to 2.75% by end-23 might be far too conservative.
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