The Numbers Got Worse This Week

When we last covered this story, the 30-year Treasury briefly kissed 5% and April CPI came in at 3.8% year-over-year. That was the alarm bell.

Now the alarm is still ringing — and it's getting louder.

According to Reuters via Global Banking & Finance Review, Italian 10-year bond yields surged 7.4 basis points to 3.86% on Friday, logging nearly 14 basis points of rise for the week. German Bund yields climbed almost 6 basis points to 3.11%. UK gilts got hit. Japanese government bond yields reached record highs.

This isn't one market having a bad week. This is a synchronized global bond selloff.

60% Chance the Fed Hikes

Before the Iran war started, money markets had at least two Fed rate cuts priced in for 2025-2026.

Now? According to LSEG data cited by Reuters, traders see a 60% probability of a Fed rate hike this year. Just four out of the 24 most influential central banks globally have any meaningful chance of cutting rates. The rest are tilted toward hikes.

That is a complete inversion of the rate environment markets were operating in just weeks ago.

Allspring's position, according to Bloomberg, is that the Fed won't cut until late 2026 at the earliest — and only if the oil shock subsides. That's a holding pattern, not a recovery timeline.

Albert Edwards Says This Gets Much Worse

Société Générale's Albert Edwards — one of the most consistently bearish and consistently correct long-term macro analysts on Wall Street — is NOT calling this a temporary energy-driven bump.

Edwards, according to Bloomberg's Odd Lots podcast and accompanying analysis, believes double-digit inflation could return. His argument isn't about oil alone. It's structural: fiscal deficits are exploding globally, supply chains are being rewired by geopolitics, and central banks have already demonstrated they're willing to let inflation run hot.

Mainstream financial media is treating this as an eccentric outlier view. It might not be.

What the Coverage Is Getting Wrong

The story most outlets are missing: this isn't just an oil story anymore.

Epicstorian News flagged something important in its May 13 report — core inflation, which strips out food and energy, has started rising again. If core is climbing alongside energy prices, the Fed can't just wait for oil to calm down and declare victory. The inflation is spreading.

Most mainstream outlets are still framing this as a war-driven energy spike that will self-correct. That framing lets policymakers off the hook. The federal deficit was already structurally unsustainable before a Middle East war added fuel costs and defense spending on top of it.

Jefferies strategist Mohit Kumar put it plainly, according to Reuters: "It's not just inflation, but also higher deficits that should be the focus." He's also forecasting a steepening yield curve — meaning long-term bond yields rising faster than short-term ones — as governments start rolling out fuel subsidy programs that blow out their budgets further.

The unstated reality: governments are about to spend more money they don't have to cushion an inflation shock they helped create.

Gold Fell. The Dollar Rose. Neither Story Is Simple.

Counter-intuitively, gold and silver dropped this week even as inflation fears intensified, according to Bloomberg. The reason: rate hike bets are lifting the dollar, and a stronger dollar makes gold more expensive in other currencies, suppressing demand.

The dollar is on track for its best week since March, per Bloomberg, as traders pile into USD on Fed tightening expectations.

A strong dollar is great if you're measuring it against other weakening currencies. It does NOT mean Americans are getting wealthier. It means everyone else's currency is getting crushed faster than ours. Global dollar-denominated debt becomes harder to service. Emerging markets get squeezed. Commodity prices in local currencies go even higher.

Inflation-Linked Bonds Are Back in Demand

One market is actually benefiting from all of this: TIPS — Treasury Inflation-Protected Securities — and their global equivalents.

Bloomberg reported this week that the Iran war has put inflation-linked bonds back in fashion as investors scramble for protection against a sustained price surge. Investors buying inflation insurance in size have stopped believing central banks can control this.

What This Means for Regular Americans

Mortgage rates aren't coming down. Credit card APRs stay punishing. Car loans stay brutal. Anyone waiting for rate relief to buy a house or refinance is looking at late 2026 at best — and that's the optimistic scenario.

Gas prices above $100 oil mean no relief at the pump. Core inflation spreading means groceries, services, and rent don't get cheaper just because a ceasefire eventually gets signed.

The federal government is going to respond to all of this by spending more. Count on it. That spending gets financed by more Treasury issuance — which puts MORE upward pressure on yields.

The cycle feeds itself. And the people paying for it are the ones without a hedge fund or an inflation-linked bond portfolio.