The yield on the 10-year US Treasury closed at around 1.68% today, but judging by the haughty commentary surrounding global bond markets you would be forgiven if you thought it was 2.68%. Since the low in July around 1.37%, that +30 bps apparently seems like it to many people. Going back to the end of QE2, the idea that rates have “nowhere to go but up” has been a constant presence during each and every bond sell-off since then (and there have been a few).

The reason is that nobody seems to understand what interest rates are telling them. The only goal the Federal Reserve ever accomplished was convincing the world that it was powerful and mighty, a PR campaign sourced out of the so-called Great “Moderation” that lingers on even today after having been thoroughly disproven time and again (especially about “moderation”). So much of the world, especially in and around official channels, simply wants to believe in the technocracy and general technical competence that was only assumed of the Greenspan Fed.

And so it is with bond markets. Even the Wall Street Journal today writes up the angst over the bond market’s most recent move, classifying it in just those terms.

The sell-off in government bonds that started last week continued to ripple through financial markets on Monday as investors dialed back their expectations of future central-bank stimulus.

Investors are now asking whether markets are on the verge of another so-called bond-market tantrum, in which yields rise sharply as prices fall. So far, most conclude that markets are not. Many investors believe that central banks will continue to provide aggressive stimulus because economic growth and inflation remain low.

It is the paralyzing “paradox” that plagues what used to be known as “forward guidance.” In other words, if “stimulus” actually worked, the bond market would price that as higher rates; not lower. When the economy actually does recovery (some day in the distant future, a point in time that will be determined by monetary reform, not typical market gyrations) the UST curve will rise and steeper – just as it did during 2013’s “taper tantrum.”