The economy is strong, inflation is rising and the Fed is tightening, so why aren’t 10-year yields higher? Caroline Baum explains.The bond market is asserting its independence. Buffeted as it is by an array of external forces and internal dynamics, the benchmark 10-year Treasury note has refused to kowtow to a strong economy, rising inflation, widening budget deficits and prospective interest-rate increases, all of which, in and of themselves, would have been sufficient in previous eras to send yields soaring. Not this time. The 10-year Treasury TMUBMUSD10Y, +0.61% breached the 3% level definitively in May for the first time in more than four years, tried it out for a week or so before saying, thanks, but no thanks, and retreating to its comfort zone of 2.85% or thereabouts. So what gives? By definition, the long-term rate is equal to sum of the current and future expected short-term rates. The Federal Reserve, which sets the current short-term rate and gives ample guidance about future expected short-term rates, seems to be talking to a deaf audience.via