Global bond yields are breaking out, driven by a confluence of higher oil from geopolitical risk feeding inflation and a structural repricing of US fiscal recklessness. The market is rejecting the 'range-bound' narrative. With the Fed pinned on hold by sticky inflation, the front-end is anchored. The trade is curve flatteners, as the long-end remains vulnerable to rising global yields and a necessary expansion of term premium. The fiscal situation is untenable.

Market misreads potential Fed nominee Warsh as a Trump dove; he's an orthodox hawk. The core trade is a structural repricing of the curve. Sonal Desai pegs neutral r* at 4-4.25% (vs Fed's ~3%) and sees term premium normalizing to ~75bps on a deteriorating fiscal outlook. This implies the entire curve is structurally too low and vulnerable to a significant move higher. The era of central bank-suppressed volatility and yields is over.

The bond market offers attractive all-in yields, but the setup is treacherous. The long end is vulnerable to a deficit-driven steepening. AI-related credit is a clear avoid; bondholders are exposed to a data center overbuild with no equity upside. The trade is to harvest income, stay short duration, and be highly selective as tight spreads offer no margin for error.