Experts see inflation wave two approaching, potentially worse than 1970s, households may face soaring prices and tighter budgets. The 30Y Treasury is on the brink of breaking 5.00% again

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Trump’s legacy will be defined by America’s downfall, and everything he is doing right now makes that almost certain.

Ray Dalio warned the U.S. faces a “debt-induced heart attack” within three years under Trump’s budget policies, citing unsustainable borrowing and soaring interest costs. While economists agree the crisis has been years in the making, they caution that shrinking tax revenues and ballooning debt service could trigger a reckoning if investors lose confidence.

https://finance.yahoo.com/news/ray-dalio-says-america-debt-105351577.html

Torsten Slok has been turning heads on Wall Street with his charts for years, since he was at Deutsche Bank and continuing on into his current role at Apollo Global Management. His market analysis earned him a profile in Bloomberg, and he was one of the first prominent voices to warn of a potential AI bubble in stocks in the summer of 2025.

Now he sees an uncanny resemblance—almost an uncanny valley—between the inflation mountain range of the 1970s and ’80s and the inflation wave of 2021, plus what may lie ahead for the U.S. economy. In his Daily Spark newsletter on Aug. 31, Slok noted the upside pressure on inflation and inflation expectations from tariffs; dollar depreciation; and growing disagreement within the Federal Open Market Committee about how to balance rising inflation with slowing employment. (In a note titled “Ghosts of 2007,” Bank of America Research observed that the Fed has rarely cut rates against a backdrop of rising inflation.)

https://finance.yahoo.com/news/top-economist-torsten-slok-warns-184440111.html

Central banks are in a tough spot right now. Forced by the biggest inflation spike in decades, they were forced to remove their extraordinary monetary policies. Even Japan had to abandon its yield curve control policy to maintain just a bit of credibility.
This allowed markets to reflect what obviously is the massive elephant in the room: debt sustainability. Market pressure to push yield higher to compensate for structurally higher inflation risk and extremely elevated debt levels is enormous. From this angle, bond yields aren’t that high, even.

With the UK 30-year bond yield hitting 5.70% things are getting tricky in the bond market, with inflation risks still above average and economic momentum not weak enough to loosen monetary policy further. I guess that central banks are wishing for inflation to come down rapidly or for economic momentum to deteriorate significantly so they can loosen policy without having to explicitly state that debt sustainability and fiscal policy dominate monetary policy.