Bond-Market Reflation Trade Absorbs Punch to Extend 2021 Advance

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The reflation trade -- the darling of Treasuries investors betting on rebounding growth -- is proving resilient. One of the hot wagers of 2021 barely lost a beat this week even after a surprisingly soft report on consumer prices. Long-term Treasury yields touched the highest in almost a year, market proxies of inflation expectations accelerated to the fastest pace since 2014 and the yield curve tested the steepest levels in more than five years. The message is that investors still see additional fiscal stimulus as a lock and are banking on the vaccine rollout gaining momentum. The coming week’s auction of 30-year inflation-linked Treasuries stands to give a fresh test of just how much investors fear rising price pressures down the road as the economy reopens.


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