It was, doubtless, a very reasonable view a couple of weeks ago. America's economy seemed to be not just booming but at risk of overheating. Inflationary pressures were rising and the Federal Reserve had been tardy in raising rates. Bond analysts warned that the yield of the most inflation-sensitive bond, the 30-year Treasury (commonly known as the long bond) would rise to 7% or more, as the price fell in line with the dismal trend of recent months: the yield on the long bond had risen by two percentage points, from a low of 4.75% in 1998 during the turmoil unleashed by Russia's default. Since then, investors have become used to rising yields and falling prices, and have wanted relatively little exposure to long-dated bonds.
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