---
title: "Hot inflation and fiscal strains threaten bonds’ safety role"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/287441246.md"
description: "Morgan Stanley reports that bonds lose their protective role against inflation when rates exceed 2.4%, with current inflation at 3.8%. Bank of America highlights that rising U.S. deficits and interest costs are causing a bond market selloff, pushing long-term yields to levels not seen since 2007. New Fed chair Kevin Warsh faces challenges as rising yields increase debt costs and widen deficits."
datetime: "2026-05-23T22:01:18.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/287441246.md)
  - [en](https://longbridge.com/en/news/287441246.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/287441246.md)
---

# Hot inflation and fiscal strains threaten bonds’ safety role

Inflation weakens bond cushion: Morgan Stanley finds bonds lose their shock-absorbing role when inflation exceeds 2.4%, with current inflation at 3.8% keeping risks elevated. Fiscal risks mount: Bank of America warns worsening U.S. deficits and higher interest costs are fueling a bond market selloff, with long-term yields at highs not seen since 2007. Fed chair’s tough debut: New Fed chief Kevin Warsh faces a ‘doom loop’ where rising yields increase debt costs, widen deficits, and trigger more borrowing.

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