April PCE came in at 3.8% headline and 3.3% core YoY — the highest readings since 2023 — while the 30-year Treasury touched 5.197%, its highest level since July 2007. The core monthly read of 0.24% MoM offers a momentary reprieve, but with headline PCE accelerating 90bps since January, real rates structurally repricing, and 62% of BofA fund managers pricing a path to 6% on the long end, the inflation-yields feedback loop is tightening. My bearish stance on duration remains intact; if anything, it's deepening.
The April PCE print confirms what the CPI trajectory was already telegraphing: inflation is not a transient energy story. Headline PCE moved from 2.9% in January to 3.8% in April — a 90bp acceleration in four months driven by a combination of energy shock (gasoline +5.5% MoM), goods repricing (+0.7% MoM), and housing persistence (+0.5% MoM). Core PCE at 3.3% YoY with a 0.24% MoM print is the one data point bulls will anchor to — and they shouldn't. A 0.24% MoM core run-rate annualizes to roughly 2.9%, which sounds benign in isolation. But that number sits inside a multi-month acceleration sequence and a GDP-revised-to-1.6% growth backdrop where the consumer savings rate has collapsed to 2.6% from 5.5% a year ago. Spending is being funded by savings drawdown, not income growth. That is not a stable disinflationary dynamic.
On the yield side, the data this week is stark. The 30-year hit 5.197% intraday — the highest since July 2007 — and the 10-year reached 4.687% before pulling back. As of the May 29 close, the 10-year was at 4.45% and the 2-year at 3.98%, producing a 47bp curve steepening that reflects a market pricing in fiscal risk and term premium expansion rather than near-term rate cuts. TLT at $85.76 with a YTD return of +0.01% and IEF at $94.65 with a YTD return of -0.22% tell you the market has already done significant damage to duration holders — but the real question is whether the flush is complete. It isn't.
The Fed's position under Warsh is structurally uncomfortable. The funds rate sits at 3.5%-3.75% while PCE headline runs at 3.8% — that means the real policy rate is negative on a headline basis. Core PCE at 3.3% gives you a barely-positive real rate of roughly 20-45bps depending on where you measure. That is not restrictive monetary policy by any historical standard. Markets are now pricing a 51% probability of a rate hike by year-end, and the BofA survey shows 62% of fund managers expect the 30-year to reach 6%. These are not fringe views — they are the emerging consensus among institutional fixed income participants. Warsh's stated mandate to 'bring rates down' collides directly with a PCE trajectory that demands the opposite.
The NVDA and growth-tech complex is the most exposed non-Treasury asset class to this yield regime. Duration-sensitive equity valuations — particularly in semis and mega-cap tech — face a double compression: higher discount rates on out-year earnings and tightening financial conditions as the 10Y/30Y complex continues repricing. The 10-year at 4.45%-4.69% is not a yield level at which 25-30x forward earnings multiples are defensible on a risk-adjusted basis. I flagged this last month and the trajectory has not changed. The long end is the transmission mechanism here — every 25bps the 30-year moves higher tightens financial conditions more than any single Fed action.
The core thesis remains: the Fed is behind the curve on a PCE trajectory that has accelerated 90bps YTD, the long end is pricing fiscal and inflation risk that the funds rate has not yet validated, and duration is not the safe haven it was in prior cycles. TLT's flat YTD performance masks the volatility and the asymmetric downside risk if the 30-year tests 5.5%+. Until core PCE MoM prints sub-0.20% for two consecutive months — not one — and the 30-year stabilizes below 4.75%, I am staying structurally short duration and skeptical of any dovish pivot narrative.