In Yellen We Trust

That's the new bond market mantra as investors dismiss inflation risk.

As the Federal Reserve works to extricate itself from the bond market, its influence over debt investors is only increasing and boosting the chance of a soft landing for Treasuries.

While the Fed scales back the unprecedented stimulus that has inundated the world’s largest economy with more than $3 trillion of cheap cash, the differences between short- and long-term yields of U.S. government bonds indicate that investors are confident Fed Chair Janet Yellen can keep inflation in check as growth rebounds without having to ratchet up interest rates.

“Geopolitical issues and technical factors have given the Fed a ‘Get Out of Jail Free’ card this year, but that can’t last forever,” Minerd said in a June 20 telephone interview from Santa Monica, California. He estimates 10-year yields, which ended at 2.61 percent last week, need to reach at least 3 percent to provide an adequate level of compensation.

U.S. employers added more than 200,000 jobs for four straight months, the first time that’s happened since 2000, while consumer prices rose 2.1 percent in the year ended May, the most since October 2012, a government report showed last week.

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