The liquidation of risk hedges after the French election explains the rise in Treasury yields. The inflation component of US Treasury note yields has been falling along with oil prices, but the so-called real component, or the yield on inflation-protected securities (TIPS) has been rising.

Economists often confuse TIPS yield with the theoretical real interest rate in the broader economy. That doesn’t wash. The expected federal funds rate a year from now has been rising (that is, the price of fed funds futures has been falling). But TIPS yields are considerably lower than the present level of funds futures would indicate. That’s because TIPS are not just an investment but an insurance policy. Along with gold, they are the ultimate disaster hedge, an out-of-the-money put on the dollar.