Smacked in the face by reality

Bill Gross, Mr. Ultralow-Inflation-and-4.5%-Interest-Rates-Forever, is changing his tune:

Over the next three to five years, our secular outlook suggests that global inflation, and certainly U.S. inflation, will accelerate mildly for a number of reasons. We also suggest that global growth continues rather strongly at a 4% to 5% pace, which is typical of what we’re experiencing now.

That combination, I suppose, is not necessarily bond-friendly, especially in light of some of the changes that may take place in terms of financial flows—the recirculation of reserves from foreign central banks, et cetera. As a result, we’ve raised our forecast range for global interest rates, moving the range for 10-year U.S. Treasuries to 4.0-6.5% versus last year’s forecast range of 4.0-5.5%, for instance, which is sort of indicative of how we see the bond markets in general.

To which I say, it's about time. I guess rates rocketing past 5% like Rosie O'Donnell chasing a lard-covered lesbian was enough to make the esteemed Gross ponder his assumptions. For a hysterically bearish (but possibly correct) view of this development, please see Karl Denninger.