Not that there was any reason to doubt inflation as the key consideration in the bond market right now, but those looking for extra confirmation can easily find it in this morning’s chart that shows inflation expectations plummeting after ceasefire headlines (the lines in the bottom half of the chart start dropping right when the ceasefire news hit).
De-escalation remains a double-edged sword for the bond market, however, with some unknown amount of demand in the market owing itself to geopolitical uncertainty (we think most of this has been priced back out over the month of March, but perhaps not all).
Why might most of the flight-to-safety have been priced back out? There’s no way to be certain because markets can move for other reasons besides the Ukraine war. What we CAN see is that inflation-adjusted yields have already risen back to pre-Ukraine levels.
This is in line with other indicators (like the Rouble) that have waxed in early March and waned back to late Feb levels recently.