Interest Rates and Inflation

Following the recent spike in interest rates, the year over year (y/y) change on the ten-year treasury yield is now over 20%. This has raised fears among investors that inflation is creeping into the market.

Since 1962, we found twelve other periods where bonds sold off causing the yield on the ten-year to rise by more than 20% y/y. For each of those periods, we looked to see if the rise in yields accurately foretold rising inflation. As the table below details, a year/year change in bond yields of 20% or more has accurately foretold rising inflation in all but one period (3/84). Unfortunately for stock market bulls, the market doesn't fare as well. The average gain in the S&P 500 over the next year averages only 1.0%.

Comments

[Peter]

My question is in regards to the 10y y/y changes I have found years in which the rate of change exceed 20% or higher and was not mentioned on that list such as mutiple times in 1980 and 1981. Can you please explain how you produced the results to the study. I took the close at month end for every year and compared that month with the following years same month explain May 05 close versus May 06 close. Regards