We are in an era of fiscal dominance where shocks are rate scares rather than growth scares, and structurally higher inflation means the 10-year yield has more upside risk to 5% than downside.
Yurion argues the macro regime has shifted from the post-GFC deflationary growth-shock era to one where fiscal policy dominates and inflation is structurally higher — making rate scares the new normal and pushing bond yields higher. ✦ AI generated
Yurion Timmer · The Compound · 2026-07-20 · original ↗
starts at this moment · 10:30
“I just want to hear you explain like where that risk resides here. ... yields are higher than at basically any point they've been at since 2008.”
we're in an era of fiscal dominance and fiscal policy dominates as the as the name would imply. Um, and we're, you know, we're no longer in the era where the main concern in a 6040 type portfolio are growth scares or growth shocks, right? Think about the GFC. That was a growth shock. COVID was a growth shock. ... Now we're on the other side and when we get a shock and and shock is a big word. Um but when we get a scare, it's it's a rate scare, not a growth scare.
verbatim transcript · starts at 10:30
10:15point they've been at since 2008. Around there, you know, you're getting four to 5% in high in high quality bonds. Uh, investors in the 2010s would have killed for that. Uh so I'm just curious where you come at from the yield side of things and then we can talk about more about the concentration as well. >> Yeah. So my my take on on interest rates um is that we're in an era of fiscal
10:35dominance and fiscal policy dominates as the as the name would imply. Um, and we're, you know, we're no longer in the era where the main concern in a 6040 type portfolio are growth scares or growth shocks, right? Think about the GFC. That was a growth shock. COVID was a growth shock. Uh and in between those two episodes, we had obviously zero interest rate policy, financial repression, quantitative easing. But but
11:07the whenever there was a shock to the system, it was a deflationary growth shock. Now we're on the other side and when we get a shock and and shock is a big word. Um but when we get a scare, it's it's a rate scare, not a growth scare. So 2022, of course, was was the the the initiation of that. uh rates reset around the world. Um and since
11:29that time, we've had a few minor little growth scares and that would push the 10-year down slightly below four, but like holding a beach ball underwater, it never stayed there very long because we're now in a fiscally dominant era and potentially in a structurally more inflationary era. We all know that inflation went from two to nine uh during COVID and it's back down to three, but it's not down to two. And
11:57it's not going to be down to two unless the year-over-year rate goes well below two because you're solving for a long-term average. So, like the five-year inflation rate is at four and rising still. And so when you think about bonds and whether they compensate you like you make a good point in that uh nominal yields are you know a lot better than they used to be. But when I
12:20look at real yields so the tips real yield is about 2.3%. So that's pretty generous. You know I I can I I can I can live with a positive real. >> We had negative tips yields for a while there right? >> Yeah. In 2020 we were negative -2 and we swung to positive2. And I look at the nominal yield. we're at 460. So that leaves a break even spread like an