The real cost of money is surging. The U.S. 10Y Treasury yield reached 5.22% on October 8, up 103bp since the start of 2026. But what is actually driving the increase? A Treasury yield has two key components: the real yield, which represents the return investors earn after adjusting for inflation, and inflation compensation, which reflects expected inflation over the bond's life. Of that 103bp rise, 93bp came from higher real yields, while only 10bp came from higher market-implied inflation expectations. In other words, roughly 90% of the increase reflects a higher inflation-adjusted return demanded by investors. This is an important distinction. The bond market is pricing a much higher real cost of money, while long-term inflation expectations have barely changed. #RealYields #BondMarket