With the speed and magnitude that Treasury yields have risen recently, many commentators have suggested it is due to a new paradigm of high interest rates based on structural inflation, stagflation, a higher neutral real rate, or fiscal concerns. But recent economic data suggests that yields have risen because of a two-month run of good economic data; likely being extrapolated into the future. As Jerome Powell said in the FOMC press conference in response to a question of if inflation was permanently higher,

“So I guess I would point more to — rather than pointing to a sense of inflation having become more persistent, we’ve seen inflation be more persistent over the course of the past year, but I wouldn’t say that’s something that’s appeared in the recent data. It’s more about stronger economic activity, I would say. So if I had to attribute one thing, again, we’re picking medians here and trying to attribute one explanation, but I think broadly stronger economic activity means we have to do more with rates, and that’s what that meaning is telling you.”

These two months of better economic data can be seen in several releases; Industrial Production, Initial Jobless Claims, ISM Manufacturing PMI, and Retail sales. Better economic data isn’t permanent. When the economic data weakens, yields will fall.