TS Lombard’s Steven Blitz says the Fed repeated an “original sin” and the 10-year Treasury yield could reach 8%

TS Lombard chief U.S. economist Steven Blitz is warning that the Federal Reserve has repeated what he calls an “original sin”: easing policy before inflation was fully defeated. In his latest report, Blitz argues that Wall Street is thinking too narrowly by focusing on 6% as the next major threshold for the 10-year U.S. Treasury yield. He says 5.75% may only be an interim platform and that 8% is the longer-term destination over the coming years. His case rests on a combination of loose fiscal policy and loose monetary policy, which he says is pushing the floor for both inflation and yields higher in each cycle. Blitz also points to swap spreads as evidence that investors are increasingly pricing fiscal risk rather than simply trading the shape of the yield curve or the path of policy rates. In his view, demand for sovereign bonds is weakening even after accounting for curve dynamics and bank balance-sheet regulation. Blitz does not predict a single asset crash. Instead, he argues that the first thing to break may be investors’ long-held belief that inflation will reliably return to 2% and that buying stocks and bonds on dips will always pay off.