The higher yields in its bond market shows that inflation in the United States is back at a fairly normal level of about 1.5 percent, which is good. If the 10-year yield had remained down at about 0.6 percent, I would have seriously adjusted investment portfolios. However, financial markets face the prospect of more stress, as US inflation is expected to pick up toward 2.5 percent. But this would only be temporary, as commodity prices fell sharply last year, though there is good reason to pay extra attention to these developments. My concern still lies in the middle of the scale, so to speak.

I found the drama around the surge in bond yields toward the end of February remarkable. The Australian central bank increased its intervention to push bond yields down again, and there was a discussion about whether even the US Federal Reserve would enter the market in an extraordinary way. In addition, Australian Treasurer Josh Frydenberg has warned that huge stimulus packages could threaten global financial stability. The other day, China’s top bank regulator, Guo Shuqing, voiced concern about the risk of price bubbles in the global financial market. A month ago, former US Treasury Secretary Lawrence Summers surprised everyone by expressing strong concern about the US economy overheating due to anticipated large stimulus packages. He was also very specific about the fear of rising inflation.

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