The US bond market has seen the 2yr/10yr US treasury yield curve steepening. The steepening is justified by the cyclical rebound, pent-up demand and higher inflation. Should inflation surprise on the upside and long-term yields continue to rise, the US Fed will have to decide on how to control the yield curve if they don’t want to jeopardize the economic recovery. The Fed’s message to suppress real rates would likely be bearish for the Dollar and bonds and bullish for equities and gold. In fact, the political reality is that not just the US but the G7 economies can hardly afford higher interest rates.